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55–233 2010

LEGISLATIVE HEARING ON H.R. 4241 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MARCH 3, 2010

Serial No. 111–65 

Printed for the use of the Committee on Veterans’ Affairs 

( 


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COMMITTEE ON VETERANS’ AFFAIRS 

BOB FILNER, California, Chairman 

CORRINE BROWN, Florida 

VIC SNYDER, Arkansas 

MICHAEL H. MICHAUD, Maine 

STEPHANIE HERSETH SANDLIN, South 

Dakota 

HARRY E. MITCHELL, Arizona 

JOHN J. HALL, New York 

DEBORAH L. HALVORSON, Illinois 

THOMAS S.P. PERRIELLO, Virginia 

HARRY TEAGUE, New Mexico 

CIRO D. RODRIGUEZ, Texas 

JOE DONNELLY, Indiana 

JERRY MCNERNEY, California 

ZACHARY T. SPACE, Ohio 

TIMOTHY J. WALZ, Minnesota 

JOHN H. ADLER, New Jersey 

ANN KIRKPATRICK, Arizona 

GLENN C. NYE, Virginia 

STEVE BUYER, Indiana, Ranking 

CLIFF STEARNS, Florida 

JERRY MORAN, Kansas 

HENRY E. BROWN, JR., South Carolina 

JEFF MILLER, Florida 

JOHN BOOZMAN, Arkansas 

BRIAN P. BILBRAY, California 

DOUG LAMBORN, Colorado 

GUS M. BILIRAKIS, Florida 

VERN BUCHANAN, Florida 

DAVID P. ROE, Tennessee 

MALCOM A. SHORTER, Staff Director 

SUBCOMMITTEE ON HEALTH 

MICHAEL H. MICHAUD, Maine, Chairman 

CORRINE BROWN, Florida 

VIC SNYDER, Arkansas 

HARRY TEAGUE, New Mexico 

CIRO D. RODRIGUEZ, Texas 

JOE DONNELLY, Indiana 

JERRY MCNERNEY, California 

GLENN C. NYE, Virginia 

DEBORAH L. HALVORSON, Illinois 

THOMAS S.P. PERRIELLO, Virginia 

HENRY E. BROWN, JR., South Carolina, 

Ranking 

CLIFF STEARNS, Florida 

JERRY MORAN, Kansas 

JOHN BOOZMAN, Arkansas 

GUS M. BILIRAKIS, Florida 

VERN BUCHANAN, Florida 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Veterans’ Affairs are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

March 3, 2010 

Page 

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

OPENING STATEMENTS 

Chairman Michael Michaud ................................................................................... 1 

Prepared statement of Chairman Michaud .................................................... 21 

WITNESSES 

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

Prepared statement of Dr. Burris ................................................................... 40 

Maine Veterans’ Homes, Augusta, ME, Kelley J. Kash, Chief Executive Officer .......................................................................................................................... 9 

Prepared statement of Mr. Kash ..................................................................... 37 

National Association of State Veterans Homes: 

Colleen Rundell, M.S., LNHA, President, and Administrator, Vermont Veterans’ Home, Bennington, VT .......................................................................... 3 

Prepared statement of Ms. Rundell ............................................................. 21 

Gary Bermeosolo, Legislative Officer, and Administrator, Nevada State Veterans Home, Boulder City, NV ........................................................................ 7 

Prepared statement of Mr. Bermeosolo ....................................................... 36 

Tennessee State Veterans Homes Board, Murfreesboro, TN, Robert D. Tuke, 

Chairman .............................................................................................................. 4 

Prepared statement of Mr. Tuke ..................................................................... 24 

Yukio Okutsu State Veterans Home, Hilo, HI, Keith T. Ribbentrop, State 

Veterans’ Home Liaison Officer .......................................................................... 6 

Prepared statement of Mr. Ribbentrop ........................................................... 29 

SUBMISSIONS FOR THE RECORD 

American Legion, Jacob B. Gadd, Assistant Director for Program Management, Veterans Affairs and Rehabilitation Commission, statement ............... 41 

American Veterans (AMVETS), Raymond C. Kelley, National Legislative Director, statement .................................................................................................. 42 

Brown, Hon. Henry E. Brown, Jr., Ranking Republican Member, Subcommittee on Health, and a Representative in Congress from the State 

of South Carolina, statement .............................................................................. 43 

Disabled American Veterans, Adrian M. Atizado, Assistant National Legislative Director, statement ....................................................................................... 43 

National Association of State Directors of Veterans Affairs, Linda S. 

Schwartz, RN, MSN, DrPH, FAAN, Senior Vice-President, and Commissioner, Connecticut Department of Veterans’ Affairs, Rocky Hill, CT, statement ...................................................................................................................... 45 

Paralyzed Veterans of America, statement ........................................................... 47 

Veterans of Foreign Wars of the United States, Robert E. Wallace, Executive 

Director, letter ...................................................................................................... 49 


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iv 

MATERIAL SUBMITTED FOR THE RECORD 

Post-Hearing Questions and Responses for the Record: 

Hon. Michael Michaud, Chairman, and Hon. Henry E. Brown, Jr., Ranking Republican Member, Subcommittee on Health, Committee on Veterans’ Affairs to Hon. Eric K. Shinseki, Secretary, U.S. Department 

of Veterans Affairs, letter dated March 9, 2010, and VA responses ........ 50 


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LEGISLATIVE HEARING ON H.R. 4241 

WEDNESDAY, MARCH 3, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON VETERANS’ AFFAIRS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:35 p.m., in Room 

340, Cannon House Office Building, Hon. Michael H. Michaud 

[Chairman of the Subcommittee] presiding. 

Present: Representatives Michaud, Perriello, Rodriguez, and 

Donnelly. 

OPENING STATEMENT OF CHAIRMAN MICHAUD 

Mr. MICHAUD. While waiting for another Subcommittee Member 

to arrive, if the first panel could come forward, please. 

I would like to call the hearing to order. I apologize for the delay. 

However, they called votes. In addition, the previous hearing we 

had scheduled, was snowed out. So I apologize to those who actually had come to DC, and were here waiting to testify a few weeks 

ago. I know I see some in the audience, as well as myself, who were 

here for that hearing. 

Today’s legislative hearing is an opportunity for Members of Congress, veterans and other interested parties to provide their views 

on and discuss recently introduced legislation within this Subcommittee’s jurisdiction. This is an important part of the legislative 

process and I would encourage everyone to be frank and open on 

how we can move forward with the legislation we have before us 

today. 

Today we will discuss H.R. 4241, a bill that I introduced to allow 

for increased flexibility in payment to State Veterans Nursing 

Homes. I look forward to hearing the views of the witnesses on this 

bill. I will just say a few words about the legislation that we have 

before us today. State Veterans Nursing Homes are one of the largest long-term care providers in the country. 

According to the National Association of State Veterans Homes 

(NASVH), there were 137 such Homes in 50 States and Puerto 

Rico, providing over 28,000 total beds. 

In 2006, Congress passed legislation with the intent to provide 

higher per diem payments to State Veterans Homes providing 

nursing home care for severely disabled veterans with service-connected disabilities. 

Unfortunately, the implementation of this enacted legislation has 

had the unintended consequence of lowering total per diem payment and does not cover the actual cost incurred by State Veterans 


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Homes. This unintended consequence threatens the financial viability of many State Veterans Homes and is especially a problem 

for those 30 States that have Medicare and Medicaid-certified State 

Veterans Homes because they are unable to bill the unpaid balance 

of the veterans’ care to Medicare and Medicaid. 

That is why this legislation is before us today. The legislation 

provides clarity of the language so that State Veterans Homes may 

bill Medicare and Medicaid for the balance of veterans’ care remaining after the U.S. Department of Veterans Affairs (VA) makes 

the per diem payment. 

In addition, the bill clarifies the payment to State Veterans 

Homes to reflect the actual cost of care and authorizes contracts for 

the State Veterans Homes that are similar to the VA’s Community 

Nursing Home Provider Agreement. 

And once again, I want to thank both panels for coming today 

and I will turn it over to Mr. Perriello for any opening statements 

he may have. 

[The prepared statement of Chairman Michaud appears on 

p. 21.] 

Mr. PERRIELLO. I will hold off on a statement for now. 

Mr. MICHAUD. Thank you very much. And I want to thank you, 

Mr. Perriello, for all your hard work and advocacy on behalf of our 

veterans. You definitely are a true advocate for our veterans and 

I am very pleased to see you here today to listen to the important 

testimony that we will hear. 

So without any further ado, the first panel that we have before 

us is Colleen Rundell, who is the President of the National Association of State Veterans Homes, and Administrator of the Vermont 

Veterans’ Home; Kelley Kash, who is the Chief Executive Officer 

of Maine Veterans’ Homes in Augusta, Maine; Gary Bermeosolo. 

Mr. BERMEOSOLO. Close enough, sir. 

Mr. MICHAUD. Close enough. Okay. From the Nevada State Veterans Nursing Home—if we had Congresswoman Berkley here, I 

would have her pronounce your name or introduce you—we have 

Keith Ribbentrop—— 

Mr. RIBBENTROP. Ribbentrop, yes, sir. 

Mr. MICHAUD [continuing]. From the State of Hawaii, as well as 

Robert Tuke. 

Mr. TUKE. Tuke. 

Mr. MICHAUD. Tuke. Okay. From the Tennessee State Veterans 

Homes. So I want to thank all of you for coming here and we will 

start with Ms. Rundell. 


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STATEMENTS OF COLLEEN RUNDELL, M.S., LNHA, PRESIDENT, 

NATIONAL ASSOCIATION OF STATE VETERANS HOMES, AND 

ADMINISTRATOR, VERMONT VETERANS’ HOME, 

BENNINGTON, VT; ROBERT D. TUKE, CHAIRMAN, TENNESSEE 

STATE VETERANS HOMES BOARD, MURFREESBORO, TN; 

KEITH T. RIBBENTROP, STATE VETERANS’ HOME LIAISON 

OFFICER, YUKIO OKUTSU STATE VETERANS HOME, HILO, HI; 

GARY BERMEOSOLO, LEGISLATIVE OFFICER, NATIONAL ASSOCIATION OF STATE VETERANS HOMES, AND ADMINISTRATOR, NEVADA STATE VETERANS HOME, BOULDER CITY, 

NV; AND KELLEY J. KASH, CHIEF EXECUTIVE OFFICER, 

MAINE VETERANS’ HOMES, AUGUSTA, ME 

STATEMENT OF COLLEEN RUNDELL, M.S., LNHA 

Ms. RUNDELL. Mr. Chairman, Members of the Subcommittee, 

thank you for holding this hearing on H.R. 4241, legislation that 

would remedy the unintended consequences of the Section 211(a) of 

the 2006 Veterans Benefits Act. 

Implementation of the 70-Percent Program is not only inhibiting 

the long-term care of service-connected disabled veterans, but it is 

also threatening the financial viability of many of the Nation’s 

State Homes. 

I am the Administrator of the Vermont Veterans’ Home and 

President of the National Association of State Veterans Homes. 

NASVH consists of the administrators and staff of State-operated 

Veterans Homes throughout the United States. NASVH members 

currently operate 137 Veterans Homes, which provide approximately 28,000 skilled nursing home and domiciliary beds. We assist the VA by caring for more than 50 percent of their long-term 

care workload. 

The 70-Percent Program is creating very serious difficulties for 

State Homes throughout the country. NASVH has met with Dr. 

Burris and other VA officials in an attempt to address these problems. Contrary to his written statement, however, Dr. Burris informed us that the issue can only be resolved fully by a modification to the law. 

NASVH strongly supported, and still strongly supports, the intent of the 70-Percent Program. After the Millennium Act, a service-connected disabled veterans could receive cost-free care at a private nursing home, but that same veteran could not receive costfree care at a State Veterans Home. 

The 70-percent legislation tried to achieve parity in the provision 

of nursing home benefits for our veterans. Unfortunately, the implementation of the program has failed to achieve this parity and 

has resulted in numerous problems and unintended consequences. 

Specifically, although the VA regulations state that they provide 

a higher per diem rate for veterans with service-connected disabilities, the regulations actually result in significantly lower total 

amounts being paid to many of the State Homes. The program simply does not provide to many State Homes adequate reimbursement for their actual cost of care. In short, without exaggeration, 

it threatens the financial viability of our Homes. 

This problem is particularly acute in the 30 States that have 

Medicare and/or Medicaid-certified Homes. The impact is signifiVerDate Nov 24 2008 07:21 Aug 25, 2010 Jkt 055233 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 I:\WAYS\OUT\55233.XXX GPO1 PsN: 55233

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cant enough that several States have incurred substantial financial 

losses, and others have been forced to deny or limit admission for 

such veterans. Unfortunately, the implementation of the 70-Percent 

Program is having exactly the opposite result envisioned by Congress. 

One typical example comes from my Vermont Veterans’ Home. 

Prior to the 70-Percent Program, Sergeant Jakob Lurie was admitted to my Home under Medicare after a 3-day hospital stay. Sergeant Lurie required skilled care and as a result, received 3 hours 

of therapy each day. The average daily cost for Sergeant Lurie was $476. This includes physical, occupational and speech therapy, medications, physician visits, specialized medical treatments and room and board. 

Under the 70-Percent Program, however, my Home would have received $302 a day for Sergeant Lurie’s Care, a loss of nearly $175 

per day for just one resident. The math does not add up under the 

70-Percent Program. Sergeant Lurie’s case is typical. 

Since I have arrived in Washington this week, the Vermont Veterans’ Home admitted our 11th veteran who qualifies for the 70- 

Percent Program and this number will only go up. 

Among the first 10 veterans alone, I estimate an average loss for the Vermont Veterans’ Home of $180,000. 

NASVH supports H.R. 4241, which would allow service-connected 

disabled veterans to receive the nursing home care that Congress 

intended, while reimbursing State Veterans Homes fully and more 

accurately for such care. 

We would also support clarifying language to the legislation that 

made clear that a State Home cannot receive payment from the VA 

under more than one of the alternatives provided in the bill. State 

Homes do not want to be paid twice for anything that we do. However, we do want to be paid once for everything we do. 

NASVH believes that the enactment of the bill will resolve all of 

the problems that have arisen in the 70-Percent Program, and permit State Homes to admit covered Veterans without adverse financial consequences. 

We are pleased that there is widespread support for our efforts 

to address this issue. The National Association of State Directors 

of Veterans Affairs, the National Governors’ Association, the American Health Care Association, the Military Order of the Purple 

Heart, the Catholic War Veterans, American Gold Star Mothers 

and the American Legion have all called for action to remedy these 

problems. 

I want to thank you, Mr. Chairman, the entire Subcommittee 

and its professional staff for the leadership and skill that you have 

shown in addressing the long-term care needs of our Nation’s service-connected disabled veterans. I appreciate the opportunity to testify and will be very happy to answer any questions. 

[The prepared statement of Ms. Rundell appears on p. 21.] 

Mr. MICHAUD. Thank you very much. 

Mr. Tuke. 

STATEMENT OF ROBERT D. TUKE 

Mr. TUKE. Mr. Chairman, Members of the Subcommittee, thank 

you for the opportunity to testify today. I am Robert Tuke, and I 


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am Chairman of the Tennessee State Veterans Homes Board. As 

a Marine Vietnam Veteran with a minor service-connected disability, I am especially interested in supporting efforts to assist disabled veterans whenever possible. So it is a double privilege and 

honor to address you today. 

The Tennessee State Veterans Homes operate much in the same 

manner as private nursing homes. We do not receive funding for 

operations from our State. Instead, we must maintain financial viability just as any other nursing home organization. We operate 

three nursing homes, each with 140 beds, dually certified for Medicare and Medicaid. The revenues generated and collected by our 

Homes are our operating and capital fund. 

When the VA regulations for the 70-Percent Program became effective last May, we had a total of 13 residents in our three Homes 

who met the criteria for the 70-Percent Program. By the end of 

January 2010, 8 months later, the total of such residents was 23, 

an 85 percent increase. Of the 23 current residents, 18 require 

skilled nursing home care and the other 5 require standard, custodial nursing care. 

We anticipate these numbers will continue to increase as more 

veterans become aware of the program and elect admission into the 

State Veterans Homes instead of community homes. 

Tennessee does not limit, and has no intention of limiting, admissions to its nursing homes based on payor source, and we do not 

intend to limit admissions under the 70-Percent Program. But for 

how long can we honor this commitment, especially given the consequences to revenues and expenses arising from the 70-Percent 

Program. These threaten the long-term financial viability of the 

Tennessee State Veterans Homes and to State Veterans Homes nationwide. 

As I have pointed out, the vast majority of the new admissions 

under this program require skilled nursing care services. This 

means that the billings for services for these residents are submitted to the VA instead of to Medicare. Therefore, the loss of revenue calculations that we have presented today in my written testimony are based on actual payments received from VA compared to 

what our reimbursements would have been from Medicare. 

Additionally, many expense items that are reimbursed adequately under consolidated billing rules for Medicare are not reimbursed adequately under the 70-Percent Program. Examples include services by attending physicians, specialists, and emergency 

transportation. In essence, when we admit residents who qualify 

for the 70-Percent Program, we incur higher expenses and receive 

lower reimbursement for services, as compared to reimbursements 

from other applicable payor sources. This is because the 70-Percent 

Program reimbursement is based on the lesser of the prevailing 

rate as established by the Secretary for Veterans Affairs and the 

average daily cost of care for all residents based on actual expenses 

incurred by the home. 

The average daily cost of care calculation results in a reimbursement skewed by the much larger percentage of intermediate care 

residents in each home as compared to a skilled care resident. The 

expenses associated with custodial care are significantly lower on 

a per patient day basis than those for skilled care. Moreover, the 


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70-percent veterans incur expenses, which are higher than those 

incurred by our typical Medicare residents. 

When total expenses are divided by total resident days to obtain 

the average daily cost of care, the resulting average is much less 

than the actual cost of care for qualifying residents. 

The chart included in my written testimony outlines those 

charges and reimbursements for skilled services covered under 

Medicare and under the 70-Percent Program. 

In sum, the current reimbursement methodology for the 70-Percent Program does not provide sufficient funding for State Homes. 

In fact, we estimate a loss of $338,000 in revenues over the last 

8 months alone because of the funding constraints of the 70-Percent Program. My written testimony outlines the details. 

Obviously, the Tennessee State Veterans Homes Board cannot 

continue to absorb this increase in expenses and reduction in reimbursements without dire fiscal consequences, nor can others as you 

have heard. 

In addition, you have received written testimony in support of 

this legislation from veterans service organizations and others. I 

urge you to review in particular the testimony of Linda Schwartz 

on behalf of the State Directors of Veterans Affairs. 

Thank you again for the opportunity to testify. We urge support 

for H.R. 4241 and I would be happy to answer any questions that 

Members of the Subcommittee or, Mr. Chairman, you may have. 

Thank you. 

[The prepared statement of Mr. Tuke appears on p. 24.] 

Mr. MICHAUD. Thank you very much. 

Mr. Ribbentrop. 

STATEMENT OF KEITH T. RIBBENTROP 

Mr. RIBBENTROP. Mr. Chairman and Members of the Subcommittee, my name is Keith Ribbentrop and I am the State Veterans’ Home Liaison Officer to the Yukio Okutsu State Veterans 

Home in Hilo, Hawaii. I am retired from the United States Air 

Force, and as a disabled combat veteran of the Vietnam War, I am 

grateful for the opportunity to be here today and advocate for my 

fellow comrades-in-arms. Thank you for the honor to speak on their 

behalf. 

As you know, the Veterans Benefits, Health and Information 

Technology Act of 2006 authorized the Department of Veterans Affairs to make payments to State Veterans Homes that provide 

nursing home care to veterans with service-connected disabilities. 

VA regulations implementing the 70-Percent Program purport to 

provide a higher per diem rate for eligible veterans. However, the 

program, as implemented, actually results in significantly lower 

payments to many State Veterans Homes. Unless revised, the 70- 

Percent Program will not provide the actual cost of care to State 

Homes despite Congressional intent. 

The problem is particularly urgent in States that are Medicare 

and/or Medicaid-certified. Hawaii is one of the 30 States across the 

Nation that is so certified. Under the current program, those veterans eligible for the higher per diem rate are not eligible for Medicaid funds. The tables and charts in my written testimony show 

the impact of the 70-Percent Program on our Home. 


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At the end of 2009, we had 12 veterans in our Home under the 

program. Because the program does not fully compensate our costs, 

our Home loses more than $50,000 a month on the care of those 

veterans. 

The more veterans we admit under the program, the greater our 

losses become. Over time, the program will clearly cut into our ability to provide long-term care to any veteran in our State. 

Hawaii is an island State. Our Home is located on a big island, 

which suffers from a critical shortage of doctors as well as specialty 

medical services. My written testimony details our physician needs. 

This shortage, at times, requires that we transport a resident 200 

miles by air to the island of Oahu where speciality care could be 

available. 

The rapid growth of the 70-Percent Program eligible veterans in 

our Home is duplicated nationwide. Because of this growth and its 

financial implications, many States have constrained admission to 

veterans under the new program. 

Yukio Okutsu State Veterans Home is proud to report that it is 

nearing capacity. We are approaching 99 percent filled and soon 

will need to establish a waiting list. Our Home’s wait list gives priority to service-connected veterans by order of service-connected 

disability rating. 

As the Yukio Okutsu State Veterans Home reaches capacity, our 

State Director of Veterans Services, Mr. Mark Moses, has begun to 

assess the need for Hawaii’s next State Home. The losses under 

this 70-Percent Program will risk the construction of any future 

State Home in the State of Hawaii. 

Mr. Chairman, the 70-Percent Program, was intended to be a 

blessing for veterans and their families. As currently designed, 

however, it jeopardizes our ability to care for our most deserving 

veterans. 

The National Association of State Veterans Homes has proposed 

amendments to the 70-Percent Program that are reflected in H.R. 

4241. The legislation will allow State Homes greater flexibility in 

admission and care for veterans with service-connected disabilities 

without risking the future of our Homes. 

As you and the Committee on Veterans’ Affairs consider H.R. 

4241, please know that it will be beneficial to both the veterans as 

well as the Homes that were built to serve them. I urge you to pass 

this measure. 

Mr. Chairman, thank you for your dedication, and the dedication 

of the Committee on Veterans’ Affairs in support of our Nation’s 

veterans. 

[The prepared statement of Mr. Ribbentrop appears on p. 29.] 

Mr. MICHAUD. Thank you very much. 

Mr. Bermeosolo. 

STATEMENT OF GARY BERMEOSOLO 

Mr. BERMEOSOLO. Mr. Chairman, I am Gary Bermeosolo, and I 

thank you for inviting me to testify today. 

As the Legislative Officer of NASVH and the Administrator of 

the Nevada State Veterans Home, I am honored to be here with 

you to request your support of H.R. 4241. 


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When Public Law 109–461 passed in 2006, its intent was to correct an inequity that existed in the system, whereby veterans with 

a 70 percent or greater service-connected disability rating couldn’t 

come to a State Veterans Home at no cost, but they could go to a 

community nursing home at no cost. This was a well-intended law 

that we supported because we thought it would correct this inequity. 

However, the implementing regulations created more inequities 

than they corrected. Now, we are being required to admit these veterans under a program intended to cover their total cost of care, 

but one which actually does not. Consequently, many States can’t 

admit these veterans because of this financial burden. 

Let me assure you, this is not an issue confined to any one State. 

This is a nationwide problem. NASVH is comprised of the 137 

State Veterans Homes across the country. Since the new law was 

implemented, I have been contacted by administrators and directors of State Homes from all over the country about the financial 

challenges this law has created. And, while I am very concerned as 

the Legislative Officer for NASVH, I am also very concerned as the 

Administrator of the Nevada State Veterans Home in Boulder City. 

Let me share just one of the many actual experiences I have had. 

On July 21st of 2009, the wife of a World War II veteran, whom 

we shall call Mr. Disabled Veteran, Mr. D.V., came to our Home 

seeking admission for her husband. She was desperate to get him 

into our Home where she could be confident he would receive quality care and have opportunities to socialize with other vets he could 

relate to. 

As we began discussing our daily cost of care, Mrs. D.V. indicated her husband had a 100-percent service-connected disability 

rating and, consequently, was not being charged for his care at his 

community nursing home. Well, we explained to Mrs. D.V. the difference between the VA’s reimbursement policies for a community 

home and for a State Home. We shared with her that we cannot, 

under current law, provide care for her husband because VA reimbursement may not cover our costs. 

At this point, Mrs. D.V. began crying and asked how this could 

be possible since we aren’t just a nursing home, but a nursing 

home especially for veterans. I told Mrs. D.V. how we arrived at 

this point and indicated I was working with other State Homes in 

Congress to fix this problem, but until it is fixed, we simply cannot 

assume the risk of admitting veterans under this program. 

Mrs. D.V. then retrieved her checkbook from her purse and she 

waived it in the air saying, ‘‘But I’ll pay for his care if you will just 

admit him.’’ We responded that VA regulations won’t allow her to 

pay for the cost of her husband’s care. She began sobbing and she 

tried to come to terms with what we were telling her. At this point, 

I looked this woman in the eye and I promised her I would do everything possible to get this fixed. 

As our meeting concluded, we encouraged Mrs. D.V. to check 

back with us periodically to see if the law had been fixed. Mrs. D.V. 

did call me back in August, then again in September, again in October, and yet again in November, each time asking if the 70-percent thing was fixed. Each time, we had to tell her, no, we are still 

working on it. 


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Mrs. D.V. doesn’t call me anymore. Her husband died on December 16, 2009, never able to access the care he deserved as a 100- 

percent service-connected disabled veteran. 

It is impossible to convey how difficult it is to turn these folks 

away. State Home administrators across the country are unwilling 

to assume the risk of bankrupting their programs, which would 

have the catastrophic effect of displacing the current residents. 

Mr. Chairman and Members of the Committee, I implore you, 

please correct this injustice. We are turning away the very people 

who most deserve and need care in State Veterans Homes. H.R. 

4241 corrects inequities and achieves the end result we are all hoping for and, most importantly, that our veterans deserve. 

Mr. Chairman, this concludes my statement. Thank you for permitting me to testify today on behalf of NASVH and the Nevada 

State Veterans Home Program. I will be pleased to answer any 

questions. 

[The prepared statement of Mr. Bermeosolo appears on p. 36.] 

Mr. MICHAUD. Thank you very much, and thank you for sharing 

that story. 

I’d better not mess up this pronunciation, the next witness, Mr. 

Kash. 

STATEMENT OF KELLEY J. KASH 

Mr. KASH. Thank you, Mr. Chairman and Members of the Subcommittee. Thank you for inviting me to testify here today. My 

name is Kelley Kash. I am the Chief Executive Officer of the Maine 

Veterans’ Homes and also retired Air Force Officer Hospital Administrator and Commander. 

The Maine Veterans’ Homes is a public not-for-profit system established 30 years ago by the government of the State of Maine. 

We operate 640 skilled nursing, long-term care and domiciliary 

beds at six locations 

All of our Homes are both Medicare and Medicaid-certified. We 

provide a considerable amount of skilled nursing care, including 

post-acute, post-operative, and rehabilitative care at no cost, or at 

very low cost, to Maine’s veterans. Skilled nursing care, however, 

is precisely the type of nursing care for which the VA’s new 70-Percent Program causes the greatest financial losses. 

We have estimated that if we were to admit every Maine veteran 

that reasonably could seek admission under the 70-Percent Program, we would lose between $8 and $16 million per year. We 

would be bankrupt within 11⁄2 to 3 years. We calculated this by reviewing the files of several typical skilled nursing residents. They 

showed us that we would lose an average of $238 per resident per 

day under this program compared to existing sources of funds with 

Medicare or Medicaid. Our data is consistent with the facts being 

reported here today by other Medicare and Medicaid-certified State 

Homes. 

Keep in mind, that this program applies to all admissions that 

are service-connected, not just those with a 70-percent or higher 

disability. A veteran with as little as a 10-percent disability could 

qualify. 

The only State Homes in the Nation that have any hope of not 

incurring substantial financial losses under this program are those 


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State Homes, which are not Medicare or Medicaid-certified or 

which provide only a minimal amount of skilled nursing care. 

As my colleagues have testified, the VA’s numbers simply do not 

add up. Under the 70-Percent Program, the VA substantially underpays for skilled nursing care and as implemented, the program 

is a financial disaster for the State Homes. As a result, many 

States have avoided admitting any service-connected disabled veterans. This is exactly the opposite result that Congress intended. 

As a medical professional, I find this places me in a moral dilemma. I must deny admission to some of our most deserving veterans in order to stay in business to continue to serve any veterans. 

Since the 70-Percent Program took effect last year, we have met 

several times with VA officials, including Dr. Burris. Frankly, I believe that Dr. Burris does not understand the problem or the enormity of the problem that the program creates in the majority of the 

State Homes in the Nation. 

In simple language, the 70-Percent Program does not pay State 

Veterans Homes enough to provide skilled nursing care to veterans. The VA in the past had said that it could cure the problems 

with the 70-Percent Program administratively, but it has not done 

so. The result has been a program in chaos. We have simply run 

out of patience with the VA. The VA can no longer hide its head 

in the sand with the disarray that it has created for our Nation’s 

veterans in our State Homes. 

What should be done? Congress should allow State Veterans 

Homes the option of continuing to receive payments from Medicare 

or Medicaid, plus the basic VA per diem rate until the VA can devise a permanent system and adopt regulations paid to State 

Homes at rates comparable to existing Medicare rates. The VA 

should be required also to pay any co-pay required by the veteran 

for his Medicare benefits, so that such care is at no cost to the veteran. Payment in full by the VA to a State Veterans Home should 

mean payment in full. 

Congress should also allow State Veterans Homes to use the existing VA Community Nursing Home Provider Contract Program so 

that we can provide immediate long-term care services to serviceconnected disabled veterans at no cost to such veterans. 

The enactment of H.R. 4241 would give the VA the authority to 

accomplish both of these goals quickly, and we urge its speedy passage. We thank the Chairman and Members of the Subcommittee 

for the opportunity to testify today, and we look forward to working 

with both Congress and the VA to effect a permanent solution to 

the substantial problems of the current 70-Percent Program. 

[The prepared statement of Mr. Kash appears on p. 37.] 

Mr. MICHAUD. Thank you very much. I want to thank all of you 

for your service to this great country of ours, as well. 

The first question I have is for Ms. Rundell. We have heard a lot 

about the Medicare and Medicaid-certified homes. How many of 

those State Veterans Nursing Homes are not Medicare or Medicaid-certified? Or are they all Medicare and Medicaid-certified, but 

just some more than others. 

Ms. RUNDELL. There is no paintbrush that covers each State. 

There are some States that have Medicare and Medicaid-certified 


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homes in the law, so within the State have a facility that is nonMedicare/Medicaid. At this point, slightly more than half of the 

State Veterans Homes in the Nation and Puerto Rico, are Medicare 

and Medicaid-certified. 

Mr. MICHAUD. After reading Mr. Burris’ testimony, you suggest 

that a number of States are satisfied with the new rate for mandatory veterans, but others are not. How many State Veterans Nursing Homes have no problem with the new rate, those who—— 

Mr. BERMEOSOLO. Mr. Chairman, I would like to take that question if I may. Gary Bermeosolo, for the record. 

We are currently having our mid-winter conference here in 

Washington, D.C. and I asked that question yesterday—how many 

of you are satisfied with the current law. No hands went up. None. 

I am not aware of any States that are satisfied with the current 

program. I am aware of a number of States that are in financial 

distress, some of them here at the table with Hawaii, Colorado, 

Maine, Tennessee, Idaho. The list goes on. 

But I don’t know where he gets his information from or where 

he got that piece of information from, but the majority of the States 

within our association have definitely indicated that they have severe issues with the law. 

Mr. MICHAUD. Thank you. And do you believe that it is mandatory for your Homes to admit service-connected veterans even 

though you would incur losses by admitting such veterans? 

Mr. TUKE. Mr. Chairman, if I may address that. Each State has 

autonomy and discretion in admitting residents to its homes and 

so no category is mandatory, not even for people in the 70-Percent 

Program, but some of us believe that it is our moral duty to admit 

these people. I am a Marine. We take care of our own. The only 

thing is, when we run a State Veterans Home that we do in Tennessee with three of them, we can’t bankrupt our Homes caring for 

some because the VA won’t pay for them and, therefore, imperils 

the care that we give to all. 

Mr. BERMEOSOLO. Mr. Chairman, if I might piggyback on to that. 

There are a number of States that have different admission criteria. For instance, many States only accept war-time veterans. 

Some States accept peace-time veterans and yet other States would 

also accept spouses of veterans and Goldstar Care and it is up to 

25 percent of the beds, which are allowed by law, so it varies from 

State to State. 

Ms. RUNDELL. Sir, if I may also add that every time that we have 

a 70-percent service-connected admission, I am faced with a moral 

dilemma because I need to, for the first time, really take a look at 

what it is going to cost and whether or not my facility is going to 

be able to handle the financial risks attached to that and still be 

able to be financially viable to take care of my other 142 veterans. 

Mr. KASH. And sir, if I might add a final note to that. The problem for me is identifying who those are, in fact. The question is do 

you know if they are 70 percent or if they are program eligible. 

As I mentioned before, I am not—I am intentionally not admitting any of these. When I report to the VA, I believe I have 9 of 

those. They came back to me and said, no, you, in fact, you have 

27. Yesterday they informed me, no, you have 22 more. You actually have 49. This afternoon I found out that one of the people we 


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thought was 100 percent disabled was, in fact, not eligible for the 

program, the fact that he has been in our Home for 21⁄2 years 

under this, quote, ‘‘program.’’ 

So for me, it is really hard. How do you sort this out and you 

can’t figure out if, in fact, your person qualifies for 70-percent service-connected admission? 

Ms. RUNDELL. So if we admit them, believing they are 70-percent 

service-connected, it is very difficult to go back and bill if they are 

not 70-percent service-connected. With Medicaid, I am only allowed 

to go back 90 days and pick up billing, and I don’t think it is fair 

to hit a family member with a bill to say, hi, no, they weren’t really 

70-percent service-connected because I received the information 

from the Department of Veterans Affairs to know what my reality 

is or the family’s or the veteran’s. 

Mr. RIBBENTROP. Mr. Chairman, in the State of Hawaii, we have 

the latitude to accept a lot of veterans because we are reaching capacity and the Board of Governors has said that we must establish 

a waiting list. That waiting list mandates the higher percentage 

service-connected disabled veterans be put to the top of the waiting 

list. In a very short period of time we will have a home for the 100- 

percent disabled veterans. 

Mr. MICHAUD. But by the same token, the more disabled veterans go to the top of your waiting list. The cost of taking care of 

those veterans will be much higher and, therefore, if the VA is not 

paying the actual cost of care, it would put you in bankruptcy even 

sooner. 

Mr. RIBBENTROP. Yes, sir. 

Mr. MICHAUD. Mr. Donnelly. 

Mr. DONNELLY. No questions. 

Mr. MICHAUD. Other Subcommittee Members might have additional questions if they are submitted in writing. I know Ranking 

Member Brown is very interested in this. Unfortunately, he had 

another Committee hearing he had to go to, but he is very interested in trying to solve this problem. 

I guess my final question and concern is, you said your Veteran 

Nursing Homes in Maine, will lose anywhere from $8 to $16 million, while another, Vermont, will lose $180,000. I assume that is 

because Maine has six Veteran Nursing Homes. I assume that 

number includes all six. 

Do you have any data from all the State Veterans Nursing 

Homes on what they actually would lose if the VA continues with 

the current policy? Or can you provide some more data to us? 

Mr. KASH. Sir, we are happy to share what data we have collected. We have not heard from every State, but certainly have a 

good sample of States, including the States here, as well as Idaho 

and we feel we can get a lot of those numbers. But I can you tell 

that consistently, in Maine, estimated conservatively when we first 

looked at this issue that we would be losing approximately $100 to 

$125 per day per resident. We are finding it much higher than 

that. I know Tennessee found that theirs were a little bit over $200 

per day. 

But we would be happy, and we have committed ourselves all 

along with VA to work and collect data for them and provide them 

that data. We would be happy to provide what we have now. 


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[The information follows:] 

Mr. Kelly supplied the data and analyses on the impact of the 70-Percent Program implementation as requested. Extensive patient data and Medicare Cost Reports were also provided to the VA Deputy Assistant Secretary for Intergovernmental Affairs and the VA Office of Inspector General. The data and analyses readily show that VA’s Higher Per Diem payment only covers the approximate cost of 

room, board, and basic nursing. The VA’s Higher Per Diem payment does not pay 

adequately for skilled care, and in fact, appears to pay only about 1⁄2 to 2⁄3 of what 

Medicare or other payers would reimburse the State Veterans Homes for the same 

care for nearly every State reporting to us. [The data supplied to the Subcommittee 

will be retained in the Committee files.] 

Mr. MICHAUD. Thank you very much. I would like to thank each 

of you for your testimony today and I look forward to working with 

you as we move forward to resolve these issues. Thank you all. 

I invite up the next panel, Dr. Burris, who is the Chief Consultant for Geriatrics and Extended Care under the Veterans Health 

Administration (VHA), and he is accompanied by Walter Hall, who 

is the Assistant General Counsel for the Department of Veterans 

Affairs. 

I want to thank you, Doctor, for coming today. We look forward 

to your testimony and without any further ado, I will turn it over 

to you, Doctor. 

STATEMENT OF JAMES F. BURRIS, M.D., CHIEF CONSULTANT, 

GERIATRICS AND EXTENDED CARE, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; 

ACCOMPANIED BY WALTER A. HALL, ASSISTANT GENERAL 

COUNSEL, OFFICE OF GENERAL COUNSEL, U.S. DEPARTMENT OF VETERANS AFFAIRS 

STATEMENT OF JAMES F. BURRIS, M.D. 

Dr. BURRIS. Thank you, Mr. Chairman and Members of the Subcommittee. I appreciate the opportunity to appear before you today 

to discuss H.R. 4241 and how VA has been working together with 

the State Veterans Homes to try to resolve issues that, as you 

know, are affecting a number of Homes. 

For background, I will use the term ‘‘mandatory veterans’’ to 

refer to veterans who have a service-connected disability rated 70 

percent or more or who need nursing home care because of a service-connected disability at a lower rate. These are the group of veterans for whom VA has been mandated to pay for nursing home 

care. 

Under the State Home program, VA provides support to States 

to construct and operate nursing homes and domiciliaries for the 

care of veterans. In return, State Homes provide nursing home care 

to many of our Nation’s veterans. 

In testimony, we will begin by describing some of the issues that 

have arisen during implementation of the most recent legislative 

changes and the rules and how we have been working to address 

them and then briefly address H.R. 4241 specifically. 

For many years prior to the enactment of Public Law 109–461, 

VA paid the full cost of the mandatory veterans’ care in VA or private nursing homes. For State Homes, VA only paid a fixed basic 

per diem rate for all veterans. In 2006, Congress directed VA to 

pay State Homes the full cost of nursing home care for mandatory 


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veterans. VA regulations implementing this Congressional mandate 

became effective last May. 

Although some States are satisfied with the new rates VA pays 

for mandatory veterans, many have reported problems. Some 

States report that they are now receiving smaller total payments 

from all payors for the care of these veterans because they believe 

they are no longer able to bill veterans or other payors. Some 

States report that VA payments do not cover their actual costs and, 

as a result, they can no longer afford to admit mandatory veterans. 

Others reported that VA facilities stopped providing specialty physician services to their mandatory veterans. I want to assure impeding Subcommittee that VA is committed to the State Home Program and when we ascertain circumstances for the intent of Public 

Law 109–461, we are working hard and have been working for 

some time to try to find solutions and avoid adverse impact on veterans. 

In an effort to better understand these difficulties, VA has met 

on several occasions with representatives of the National Association of State Directors of Veterans Affairs, the National Association 

of State Veterans Homes, the National Governors’ Association and 

Congressional staff. As a result of these discussions, we believe 

that there are non-legislative actions that VA, working in cooperation with the State Veterans Homes, can take to ameliorate some 

of these issues. 

We have asked the States to share with us supporting documentation that demonstrates how their actual costs for the care of 

ambulatory veterans exceed the allowable VA per diem payment 

under the current law and some of the States have provided those 

data, including Maine and Idaho and Vermont. With this information, we will be in a better position to understand the impact of 

Public Law 109–461 and address the States’ concerns. 

As you will note in my written testimony, we will also need that 

data to come to a conclusion on one element of the legislation we 

are here to discuss today, the provision related to using contracts 

for the State Homes. 

VA has already taken steps toward resolving one of the reported 

difficulties. On October 19, 2009, VA issued guidance to its field facilities that the full per diem payment to State Homes covers nursing home services only and that VA facilities are to continue providing most specialty care to mandatory veterans as they did prior 

to the initiation of the new payments. This has assured veterans 

of access to needed care and provided cost avoidance for the State 

Homes. 

There are also interagency discussions taking place because 

other Federal agencies payment rules form part of the Homes’ support and we need to make sure everyone is clear on the interpretation of those regulations. 

Further, we believe that some States may need assistance in understanding the provisions of Office and Management and Budget 

(OMB) Circular A–87, which States must use to calculate their actual cost of care for mandatory veterans. VA has offered to work 

individually with States to improve their understanding of Circular 

A–87 cost-accounting rules and enhance their cost recovery. 


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VA’s official positions on the provisions of H.R. 4241 are stated 

in the written testimony which was submitted, so I won’t reiterate 

that now but I will summarize that VA cannot support the legislation as it now written. 

Mr. MICHAUD. Thank you for—are you all done? 

Dr. BURRIS. Just to emphasize, as I did earlier this week at the 

winter meeting of the National Association of State Veterans 

Homes, that we are committed to finding a solution, we will continue to work with the State Homes and other partners to ensure 

these veterans are properly served. And please note that we are 

happy to meet with you and your staff at any time to discuss these 

issues and provide technical assistance. Thank you, sir. 

[The prepared statement of Dr. Burris appears on p. 40.] 

Mr. MICHAUD. Thank you very much, Doctor, and I want to 

thank you, Mr. Hall, for coming here today as well, and I appreciate your willingness. You say that you can fix this without legislation. However, as a Member who is sitting on this side of the 

aisle who passed the bill and has seen it take 21⁄2, 3 years to implement, I have a concern with what has happened or is going to happen to our veterans who need long-term care. 

We heard a devastating story of a veteran in Nevada. That is unconscionable and that is something that I would not be very proud 

of if I were over at VA. 

Also, you mentioned in your testimony that the language in Public Law 109–461 stated that the veterans State nursing homes 

should be paid the full cost. What is your interpretation of ‘‘full 

cost?’’ 

Dr. BURRIS. Well, Public Law 109–461 specifies that VA is to pay 

the full cost of nursing home care and the elements of nursing 

home care are defined in our regulations and include, for example, 

basic primary physician care, skilled nursing, nutrition and dietary 

services, routine and emergency medications, rehabilitation services and then there are some additional services that the Home is 

required to make available to veterans living there, but those other 

services, such as dental services, can be charged for. 

So our sense is that the speciality medical services that the State 

Homes have referred to, such as dialysis or speciality physician 

care, would fall outside of the services that we’re paying for with 

the per diem and that potentially those other services could be 

billed for. We have had staff level discussions with Medicare and 

Medicaid, staff level folks who have clarified for us that under the 

Centers for Medicare and Medicaid Services (CMS) rules, Medicare 

and Medicaid pay for a bundled set of services in the nursing 

home, but the unbundled services that fall outside of that package 

can be billed for. 

We have recently met with the legislative office at the U.S. Department of Health and Human Services and the policy office at 

CMS to explain problems that have arisen in the implementation 

of the law and they have said that they will take that under consideration, go back to their general counsel and discuss it and try 

to come forward with a clarifying letter on what their policy is. 

Mr. MICHAUD. And when do you expect that to happen, next year 

or the year after? I mean, I don’t want to be sarcastic about it, but 

I am concerned that I see our veterans are not being taken care 


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of because of what I feel is improper implementation of the law 

that we passed. It is probably our fault for not specifying in more 

detail what full cost means, but it is our hope as legislators that 

we don’t want to tie administrators hands so that they have no 

wiggle room. We expect common sense to be used. 

But by the same token, we don’t want to have legislation that 

would give you that flexibility, and at the same time be contrary 

to what the intent of the law was. Now, you mentioned that some 

services can be billed. It is my understanding that once the VA 

makes its payment to a State veterans nursing home, then they 

can no longer bill Medicare and Medicaid because that is considered payment in full. 

So if that isn’t payment in full, then you have a lot of State Veterans Nursing Homes that have a high population of Medicare and 

Medicaid, then they are on the short end of the stick, so who are 

they going to bill if they can’t bill Medicare and Medicaid. 

You know, that is the problem that we are facing and we do have 

a lot of nursing homes with both Medicare and Medicaid patients. 

So who are they going to bill? You mentioned that they can bill for 

those other services. If it is not Medicare or Medicaid, then who are 

they going to bill? 

Dr. BURRIS. Well, there is quite a bit of variation from State to 

State in the way the Homes are funded. Some State Homes do receive a direct appropriation from the State. Many do not. They fall 

under different lines of authority in the State. Some are under the 

State Department of Veterans Affairs. Some are under the State 

Department of Public Health. 

So it is very difficult to give a single answer to your question. 

But if the veteran had long-term care insurance, that might cover 

some of the services that are not part of our defined bundle of nursing home services. 

If the veteran is eligible for care from VA, many services can be 

provided through the VA health care system. 

Mr. MICHAUD. The VA runs long-term care facilities as well, correct. 

Dr. BURRIS. Yes, sir, that is correct. 

Mr. MICHAUD. How many veterans in your long-term care facilities have long-term care health insurance? 

Dr. BURRIS. I don’t know that number, sir. 

Mr. MICHAUD. Would you have to go after that insurance first before the VA pays for it. 

Dr. BURRIS. No. No. The VA per diem payment to the State 

would be made irrespective of what other sources are paying. 

Mr. MICHAUD. Well, I am talking about the veterans that are in 

the VA facilities. You mentioned collecting payments from longterm care insurance, but I doubt very much that many veterans 

have long-term care health insurance. So my point is, if, in fact, 

you are taking care of veterans in the VA’s long-term care facilities, 

you must have some idea of how many of those have long-term care 

health insurance, that you could probably go after third-party billing for. Would that be possible? 

Dr. BURRIS. I do not have that data. 

Mr. MICHAUD. Do you have to go after third-party billing for veterans in the long-term care facilities. 


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Mr. HALL. I believe for care provided for a non-service-connected 

disability, we may collect against third-party insurers. 

Mr. MICHAUD. You may? 

Mr. HALL. Yes. 

Mr. MICHAUD. Have you? 

Mr. HALL. I honestly couldn’t tell you, sir. 

[The VA met with Committee staff regarding the State Homes 

issues.] 

Mr. MICHAUD. Well, my point is when the doctor mentioned collecting payments from veterans with long-term care insurance, I 

doubt very much if you are going to find veterans who need nursing home care if they have long-term care health insurance, so I 

think that argument is not valid. 

My next question is, you mentioned that a number of States are 

satisfied with the new rates that the VA pays for mandatory veterans. What States are satisfied with the rules? You said ‘‘a number of States.’’ So could you let me know what States are satisfied 

and whether or not they have a high Medicare or Medicaid population? 

Dr. BURRIS. Well, I have only heard from a few States either directly either for or against. 

Mr. MICHAUD. What are the few? In your testimony you say ‘‘a 

number.’’ You’re saying a few, so what are the States that are satisfied? 

Dr. BURRIS. The State of Connecticut, the State of Utah. There 

was a third. 

Mr. MICHAUD. If you could provide to the Committee the States 

that are satisfied, I would also like to know how many veteran 

nursing homes they have within those States and whether or not 

they are Medicare and Medicaid eligible. 

[The VA provided the information in the response to Question 8 

in the Post-Hearing Questions and Responses for the Record, which 

appears on p. 53.] 

Mr. MICHAUD. My next question is, would a reimbursement 

schedule that bases payment on the actual acuity of each patient 

such as the VA does with the Resource Utilization Group, be an effective mechanism to properly and accurately reimburse State Veterans Homes on 70-percent veterans? 

Dr. BURRIS. We have had discussions about that point. We believe that it might. We have not been able to—many of the State 

Homes are providing rough data for us now, but not all, so we 

wouldn’t be able to implement that at the present time, but with 

the cooperation of the States to provide the data and a change in 

the method by which we calculate the prevailing rate, we would be 

able to do that. 

Mr. MICHAUD. Once you have that information, how quickly do 

you think you might be able to put that system in place? 

Dr. BURRIS. That would require a change in the regulations and 

it is, as you know, that is a fairly lengthy process. At best, a year. 

More likely a year and a half to two. 

Mr. MICHAUD. If we were to get what you would want for regulations and actually put it in the Appropriations bill so it would go 

into effect immediately without waiting a year or 2 years, would 

that be satisfactory. 


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Mr. HALL. Yes, sir, if you could accommodate all the requirements of the regulations and statute, they are—unfortunately it is 

a very—as you know, the regs are very detailed and require, as 

these regulations did, careful cooperation of working with the State 

Homes themselves, State Home organizations to hopefully try to 

avoid the problems we have with these regulations. 

And once they are in statute, they are much more difficult to 

change than they are when they are in regulations even. 

Mr. MICHAUD. In your testimony you state that H.R. 4241 will 

increase the VA cost by $17.5 million next year and $200 million 

over a 10-year period. I am not sure whether that number is accurate, but it implies that either the current system is underpaying 

the State Veterans Homes by an equal amount or that more 70- 

percent veterans will receive nursing home care under this bill. Is 

that a fair assumption. 

Dr. BURRIS. The estimate was made by—the States have told us 

that—let me back up one more step. The law specifies that we 

must pay either the prevailing rate or the actual cost of care, 

whichever is less. The States have told us that in most cases the 

actual cost of care determined in accordance with OMB Circular A– 

87 is less than the prevailing rate, so the way that that figure was 

derived was to say that if we are currently paying the States the 

actual cost of care, and under this law would instead pay them at 

the prevailing rate, then difference between calculating the actual 

cost and the prevailing rate would result in those numbers. 

Mr. MICHAUD. And in your testimony you mentioned you were 

concerned about double dipping. If it is made clear that there is no 

double payment in this, would that change that fiscal number at 

all. 

Dr. BURRIS. It wouldn’t alter the cost to VA. 

Mr. MICHAUD. There are currently laws on the books that would 

prevent double dipping and quite frankly no one wants to get paid 

twice for the job that they are doing once. And that is clearly not 

the intention of this legislation. So you know, it is my intent to actually make that very clear that there will not be double dipping. 

My next question is, you heard from the previous panel, that 

there is a lot of concern that some of the State Veterans Nursing 

Homes will experience financial hardship depending upon the acuity of care and the number of veterans on Medicare or Medicaid 

who are eligible. 

Quite frankly, you also heard that they will not be taking veterans because they cannot operate in the red for too long. 

And the other issue that we heard is that, yes, some State Veterans Homes might still take some of the veterans, even though 

they might be operating in the red, but they will have to make a 

determination on whether or not they are going to have to exclude 

the veterans who have the most acuity, the veterans that really 

need the help. 

I guess my question, Doctor, is when you said you could do this 

administratively, how quickly can you solve the problems that you 

have heard here today administratively. 

Dr. BURRIS. Now, we have already addressed the issue of VA providing specialty care. That is done. And we have not continued to 


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receive concern about that issue from the States. I have asked 

them to let me know if there are needs where care is denied. 

We have met with CMS and we will push—the VA Chief of Staff 

is taking direct interest in this issue. He has offered to call—in 

fact, did call his counterpart to start this process going. So we feel 

a sense of urgency about getting the Medicare and Medicaid business cleared away and clear guidance to both our field personnel 

and to the State Homes. We have offered to provide assistance on 

the cost accounting principles in OMB Circular A–87, to any of the 

States that feel they might benefit from that. 

In terms of a change in regulation to base the prevailing rate on 

acuity of care, that would require a regulatory change and that 

would take some time. 

Mr. MICHAUD. Some time meaning a year or 2 years? 

Dr. BURRIS. Yes, sir. And whatever time is needed for the States 

to ramp up to provide us the data. 

Mr. MICHAUD. Both the majority and minority staff will be submitting additional questions for the record. I just want to reemphasize, Doctor, that it appears that there are two, maybe three States 

that have no problem, which means that the overwhelming majority of the States do have a huge problem with the rules that were 

implemented to implement the statute. 

As other Members of Congress hear more about what is happening at the State Veterans Nursing Homes, they are getting 

upset and rightfully so. And I don’t want to have to deal with my 

colleagues from all around the country wanting to know why VA 

is not addressing this particular problem when we know they have 

known about it for some time. 

I appreciate your working with the State Veterans Nursing 

Homes and I would encourage you to continue working with them 

because we have to solve this problem. 

By the same token, it is my intent to move forward with this legislation in the event that you are not able to work something out 

and are willing to work with the State Veterans Homes to fine tune 

legislation to make clear what we intended when we passed the 

original law. I can’t sit back and not do anything and expect VA 

to ask, because it is not all in your control. You had mentioned 

CMS. They have jurisdiction so I can’t wait a year or 2 years in 

the meantime to hear similar stories to what we heard earlier 

today from the Nevada State Veterans Nursing Home, especially if 

you look at the service that they provide. 

It is my understanding when you compare the cost of the State 

Veterans Nursing Home, to the cost of the VA long-term care, the 

State home is much cheaper. I don’t know if that is still true today, 

but I assume that it is, so you are definitely getting your money’s 

worth. But more importantly you are taking care of the veteran 

that needs that help, and that is something I want to work with 

you on. But by the same token, having talked with Ranking Member Brown, we don’t want to take chances and have nothing get 

done. 

So we will work to move this legislation forward. At the same 

time, hopefully, you are able to work within your separate agencies 

to try to solve this as quickly as possible. 


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As I mentioned earlier in my testimony, I have always been 

under the belief that we ought to allow those agencies the flexibility to work within the law to implement the intention of the law 

without having to have it very strict. I believe that you need that 

flexibility because we cannot envision all the problems that might 

occur down the road, and therefore, that flexibility should be there. 

But by the same token, I also believe and I have seen over and 

over again, whether in the Maine legislature, when I was in the 

legislature there or here in Congress, some agencies tend to go beyond what the intent of the law was, whether because it is poorly 

written or whether it was written appropriately but those who are 

implementing the law just might like it, so they are doing whatever 

they want to do to implement it. 

This is an issue that is extremely important. I talked to Senator 

Akaka yesterday at the Joint Hearing with the Senate Veterans’ 

Affairs Committee and I will be working with him as well on this 

legislation. We have to solve the problem and I know that you understand the importance of it, and hopefully, with the testimony 

that you have heard today and with the individual State Veterans 

Nursing Home talking to you about the concerns they have, we can 

work together and solve these problems and take care of the veterans that we are supposed to be taking care of. 

So I want to thank you, Doctor, for coming here and, Mr. Hall, 

for coming here and I look forward to working with you along with 

the State Veteran Nursing Homes across this country to address 

this big concern that we are faced with today. 

So thank you very much and we will provide additional questions 

to the VA, as well as the State Veterans Nursing Homes in writing 

and hopefully you can get the responses in quickly. 

If there is no other statement, then I would adjourn this hearing. 

Thank you for coming, I appreciate it. 

[Whereupon, at 3:42 p.m. the Subcommittee was adjourned.] 


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A P P E N D I X 

Prepared Statement of Hon. Michael H. Michaud, Chairman, 

Subcommittee on Health 

I would like to thank everyone for coming today. 

Today’s legislative hearing is an opportunity for Members of Congress, veterans, 

the VA and other interested parties to provide their views on and discuss recentlyintroduced legislation within the Subcommittee’s jurisdiction in a clear and orderly 

process. This is an important part of the legislative process that will encourage 

frank discussions and new ideas. 

Today, we will discuss H.R. 4241, which allows for increased flexibility in payments for State Veterans Homes. 

I look forward to hearing the views of our witnesses on this bill before us. 

f 

Prepared Statement of Colleen Rundell, M.S., LNHA, President, National 

Association of State Veterans Homes, and Administrator, Vermont 

Veterans Home, Bennington, VT 

Mr. Chairman and Members of the Committee, on behalf of the National Association of State Veterans Homes (‘‘NASVH’’), thank you for holding this hearing on 

H.R. 4241, legislation that would remedy the unintended consequences of the implementation of section 211(a) of the Veterans Benefits, Health Care, and Information 

Technology Act of 2006 (Pub. L. No. 109–461) (the ‘‘70-Percent Program’’). Implementation of the 70-Percent Program is not only inhibiting the long-term care of 

service-connected disabled Veterans (the opposite of its intended effect), but it is 

also threatening the financial viability of many of the nation’s State Veterans 

Homes. 

NASVH consists of the administrators and staff of State-operated Veterans homes 

throughout the United States and the Commonwealth of Puerto Rico. NASVH members currently operate 137 Veterans Homes in all 50 States and Puerto Rico. Our 

nursing homes provide approximately 28,000 nursing home and domiciliary beds for 

Veterans and their spouses, and the gold-star parents of Veterans. Our nursing 

homes assist the United States Department of Veterans Affairs (‘‘VA’’) by caring for 

approximately 53 percent of the VA’s long-term care workload at the very reasonable cost of only about 12 percent of the VA’s long-term care budget. 

The national State Veterans Home system is an economical alternative to other 

VA long-term care programs. In fact, the VA Office of Inspector General has reported: 

A growing portion of the aging and infirm veteran population requires domiciliary and nursing home care. The SVH [State Veterans Home] option has become increasingly necessary in the era of VAMC [VA Medical Center] 

downsizing and the increasing need to discharge long-term care patients to community based facilities. VA’s contribution to SVH per diem rates, which does 

not exceed 50 percent of the cost to treat patients, is significantly less than the 

cost of care in VA and community facilities. 

Implementation of the 70-Percent Program, however, is creating very serious difficulties for State Veterans Homes throughout the country. This program authorized 

payment of different per diem amounts by VA to State Veterans Homes which provide nursing home care to Veterans with service-connected disabilities. The VA did 

not issue regulations to implement the 70-Percent Program until April 29, 2009, and 

problems arose immediately with its implementation. NASVH has met with VA officials in an attempt to address these problems administratively, but the VA has informed us that the issue can only be resolved fully by a modification of the law. 


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NASVH strongly supported, and strongly supports, the intent of the 70-Percent 

Program, which originated in legislation drafted by Senator Daniel Akaka and Congressman Jeb Bradley. In fact, after the enactment of the Veterans’ Millennium 

Health Care and Benefits Act in 1999 (the ‘‘Millennium Act’’), NASVH noted a disparity in the long-term care treatment of service-connected disabled Veterans. Specifically, after enactment of the Millennium Act, a service-connected disabled Veteran could receive cost-free care at a private community nursing home under a VA 

community nursing home contract, but that same service-connected disabled Veteran could not receive cost-free treatment at a State Veterans Home. Accordingly, 

Senator Akaka, Chairman of the Senate Committee on Veterans’ Affairs, and Congressman Bradley introduced legislation to eliminate this disparity. 

Chairman Akaka’s legislation tried to achieve parity in the provision of nursing 

home benefits for our Veterans between community nursing homes and State Veterans Homes. Unfortunately, the implementation of Chairman Akaka’s legislation 

has failed to achieve such parity and has resulted in numerous problems and unintended consequences. 

Specifically, although the VA regulations implementing the 70-Percent Program 

state that they provide a ‘‘higher per diem rate’’ for Veterans with service-connected 

disabilities, the regulations actually result in significantly lower total amounts being 

paid to many State Veterans Homes providing nursing home care to Veterans with 

service-connected disabilities. As implemented, the program simply does not provide 

to many State Veterans Homes adequate reimbursement for their actual cost of care 

for disabled Veterans, despite congressional intent that it do so. To the extent that 

State Veterans Homes continue to admit service connected disabled veterans under 

the 70-Percent Program, it threatens the continued financial viability of such State 

Veterans Homes. 

This problem is particularly acute in the 30 States that have Medicare-certified 

and/or Medicaid-certified State Veterans Homes. The impact is significant enough 

to have caused several such States already to incur substantial financial losses on 

the care of service-connected disabled Veterans under the 70-Percent Program, and 

others to refrain from admitting Veterans with service-connected disabilities, in 

order to avoid such financial losses. Accordingly, the implementation of the 70-Percent Program is having exactly the opposite result envisioned by Congress. 

Although numerous representatives from NASVH, the American Health Care Association, the National Governors’ Association, and others have all met with senior 

VA officials including Dr. James Burris to attempt to remedy the problems with the 

70-Percent Program, we have been frustrated by the fact that senior VA officials appear simply to be unable or unwilling to address the 70-Percent Program’s serious 

financial problems. 

These problems can be illustrated by many examples from State Veterans Homes, 

several of which the Committee will hear today. One typical example comes from 

my home State of Vermont. Prior to implementation of the 70-Percent Program, Sergeant Jakob Lurie (a pseudonym for a 70 percent service-connected disabled veteran) was admitted to the Vermont Veterans’ Home, which is Medicare and Medicaid certified. He had experienced a three-day hospital stay and was admitted to 

the Vermont Veterans’ Home thereafter under Medicare. Sergeant Lurie had an 

acute medical condition that required rehabilitation. As a result, Sergeant Lurie received three hours of therapy each day, including an hour each day of physical, occupational, and speech therapy. 

As detailed below, the average daily cost for Sergeant Lurie was $476.51. Under 

the 70-Percent Program, however, the Vermont Veterans’ Home would have received 

only $302 a day for Sergeant Lurie’s Care. The math does not add up under the 

70-Percent Program, especially for Veterans requiring skilled nursing care. 

In this example from the Vermont Veterans’ Home: 

Physical therapy $47.11 an hour including benefits 

Occupational therapy $53.83 an hour including benefits 

Speech/language therapy $60.57 an hour including benefits 

Medications $22.00 daily average 

Physician visits1 $11.00 daily average Wound vac machine for pressure area $33.00 daily average 

Room and board $249.00 per day 

1Per Federal regulations, a Veteran must be seen by a physician within 48 hours of admission for a full history and physical; then every 30 days for the first 90 days; then every 60 days. This schedule applies only if 

the Veteran is medically stable. Often, Veterans are not medically stable and must be seen more frequently. 

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

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


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Compared to a 70-Percent Program calculated payment of only $302/day, this is 

a loss to the Vermont Veterans’ Home of $174.51/day for just one resident. 

After I calculated the loss that the Vermont Veterans’ Home would have incurred 

on Sergeant Lurie under the 70-Percent Program, I calculated the substantial actual 

losses and minor gains that the Vermont Veterans’ Home has experienced for other 

Veterans under the 70-Percent Program. These losses and gains are as follows: 

Currently, the Vermont Veterans’ Home has ten Veterans who qualify for the VA 

70-Percent Program and this number is expected to grow. At a 70-Percent Program 

payment of $302 per day, below are the actual financial results for these ten Veterans: 

Veteran #1 loss of $108.77/day 

Veteran #2 loss of $39.53/day 

Veteran #3 loss of $127.91/day 

Veteran #4 loss of $126.42/day 

Veteran #5 loss of $42.01/day 

Veteran #6 loss of $124.76/day 

Veteran #7 above cost by $7.14/day 

Veteran #8 above cost by $7.13/day 

Veteran #9 above cost by $17.14/day 

Veteran #10 above cost by $41.79/day 

On the average, the 70-Percent Program rate will result, for just the first ten veterans admitted under the Program, in an annual loss to the Vermont Veterans’ 

Home of $181,113. 

As Veterans age, their medical needs often increase and further aggravate the 

shortfall between a State Veterans Home’s costs and VA payments under the 70- 

Percent Program. 

NASVH supports H.R. 4241, introduced by Congressman Michael H. Michaud. 

The enactment of H.R. 4241 would allow service-connected disabled veterans to receive the nursing home care that Congress intended, while reimbursing State Veterans Homes fully and more accurately for such care. 

H.R. 4241 would do four things. First, it would allow State Veterans Homes to 

serve service-connected disabled veterans, at no cost to such veterans, under the 

VA’s existing community nursing home contract program. This was Senator Akaka’s 

original intent in proposing the legislation which became the 70-Percent Program, 

and we believe that such intent should be honored now. 

Second, if a community nursing home contract cannot be arranged between the 

VA and a State Veterans Home for a service-connected disabled Veteran, H.R. 4241 

would require that payments under the VA’s 70-Percent Program be computed according to a State Veterans Homes’ actual cost to care for a Veteran, and not computed according to OMB Circular A–87, which in almost all instances allows a lesser 

reimbursement than the prevailing rate determined by the Secretary of the VA. 

Third, H.R. 4241 would clarify that State Veterans Homes and private medical 

providers could continue to receive payment from sources other than the VA for 

services not reimbursed under the 70-Percent Program and required for the medical 

treatment of service-connected disabled veterans residing in State Veterans Homes. 

Fourth, H.R. 4241 would clarify, consistent with existing law, that payments 

made to a State Veterans Home under the 70-Percent Program cannot be offset 

against any other payment made to assist a service-connected disabled veteran. 

In addition, NASVH would support a clarification to H.R. 4241 to emphasize the 

fact that a State Veterans Home cannot receive payment from the VA under more 

than one of the following alternative programs: (1) the community nursing home 

contract program; (2) the 70-Percent Program; or (3) the VA’s basic (lower) per diem 

program, plus Medicaid or Medicare, for a Veteran residing in a State Veterans 

Home, and that a State Veterans Home cannot receive payment more than once for 

the same service provided to any Veteran by a State Veterans Home. These requirements generally are already subject to normal audits by the VA, Medicare, and 

Medicaid under existing law, and can be enforced easily under existing auditing 

processes. Lastly, we believe that the VA should pay any co-pay required for the 

receipt of Medicare or Medicaid services under the 70-Percent Program by a veteran 

so that such care is provided at no cost to such veteran. Payment in full by the VA 

for a veterans care means payment in full by the VA. 

NASVH believes that enactment of H.R. 4241 will resolve the problems that have 

arisen in implementing the 70-Percent Program, and permit all State Veterans 

Homes to admit 70 percent Veterans without adverse financial consequences. We 

welcome the efforts of this Committee, the Senate Committee on Veterans’ Affairs, 

and the VA to work together to solve at the earliest possible time the reimbursement problems with the 70-Percent Program. 


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There is widespread support for our efforts to address this issue promptly. In addition to NASVH, the National Association of State Directors of Veterans Affairs, 

the National Governors’ Association, and the American Health Care Association 

have all called for action to remedy the reimbursement problems associated with the 

70-Percent Program. I have attached copies of resolutions and letters from these organizations in support of our efforts. Other Veterans service organizations such as 

the Military Order of the Purple Heart, the Catholic War Veterans, American Gold 

Star Mothers, and the American Legion all have indicated their support for H.R. 

4241 as well. 

It has been asked whether the reimbursement deficiencies under the 70-Percent 

Program could be resolved by the use of ‘‘fee basis care’’ payments from the VA to 

State Veterans Homes to cover costs not covered by per diem payments under the 

70-Percent Program. NASVH does not believe that fee basis care payments ultimately can resolve this problem. Fee basis care payments are discretionary by the 

VA, are largely not designed for long-term nursing home care, and do not cover 

many services required for nursing home care. 

NASVH believes that the fairest and most accurate way to reimburse Medicarecertified and Medicaid-certified State Veterans Homes for the care of service-connected disabled Veterans under the 70-Percent Program is for the VA to use the example of the existing Medicare payment system as much as possible. Under Medicare, reimbursements for nursing home care fluctuate according to the acuity (degree of illness) of individual patients. Required pharmaceuticals and specialty care 

are automatically reimbursed, if legitimately required. Nursing homes do not ordinarily lose substantial amounts of money for patient care under the Medicare program. Accordingly, NASVH believes that Congress should not require the 30 States 

which operate Medicare-certified and Medicaid-certified State Veterans Homes to 

change fundamentally the way they fund their State Veterans Homes. Congress 

rather should require the VA to coordinate its reimbursement schedules under the 

70-Percent Program, to the extent possible, with the example of the existing Medicare system. 

I want to thank you, Mr. Chairman, the entire House Veterans’ Affairs Committee, and its professional staff, for the leadership and skill that you have shown 

in addressing the long-term care needs of our nation’s service-connected disabled 

Veterans within the State Veterans Home system. I am sure that, working together, 

we can promptly remedy the serious problems that exist in the VA’s current 70-Percent Program. 

Attachments [The attachments are being retained in the Committee files.] 

f 

Prepared Statement of Robert D. Tuke, Chairman, Tennessee State 

Veterans Homes Board, Murfreesboro, TN 

Mr. Chairman and Members of the Committee, thank you for the opportunity to 

submit testimony to you today. I am Robert Tuke, and I am the Chairman of the 

Tennessee State Veterans Homes Board. As a Marine Vietnam Veteran with a 

minor service connected disability, I am especially interested in supporting efforts 

to assist disabled veterans whenever possible. So it is a double privilege and honor 

to address you today. 

The Tennessee State Veterans Homes operate much in the same manner as private nursing homes. The Tennessee State Veterans Homes Board does not receive 

funding for operations from the State. Instead, it must maintain financial viability 

just as any other nursing home organization. The Tennessee State Veterans Homes 

Board operates three nursing homes, each with 140 beds, dually certified for Medicare and Medicaid. The revenues generated and collected by our Homes are the operating funds for the organization, from which the Board pays its employees, vendors, debt service, repair and replacement of equipment and buildings, and from 

which it funds its capital purchases. 

As you know, the VA Regulations promulgated pursuant to the Veterans Benefits, 

Health Care, and Information Technology Act of 2006 became effective on May 29, 

2009. At that time, there were a total of 13 residents in our three homes who met 

the criteria for the VA 70-Percent Program. By the end of January 2010, eight 

months later, the total of such residents was 23, an 84.7 percent increase. Of the 

23 current residents, 18 require skilled nursing home care and the other 5 require 

standard, custodial nursing care. Based on the average daily census of our three 

homes, 5 percent of the patient population are covered by the VA 70-Percent Program. 


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We anticipate these numbers to continue to increase as more veterans become 

aware of the program and elect admission into the state veterans homes. Tennessee 

does not limit and has no intention of limiting admissions to its nursing homes on 

the basis of payor source, and we will not limit admissions under the VA 70-Percent 

Program. However, there are consequences to revenues and expenses arising from 

the VA 70-Percent Program that are problematic to the long-term financial viability 

of the Tennessee State Veterans Homes, just as there are to state veterans homes 

nationwide. 

As I have pointed out, the vast majority of the new admissions under this program require skilled nursing care services. This means that the billings for services 

for these residents are submitted to the VA instead of to our fiscal intermediary for 

Medicare reimbursement. Therefore, the loss of revenue calculations we are presenting today are based on actual payments received from VA compared to what our 

reimbursement from Medicare would have been had we been able to bill Medicare. 

Additionally, many expense items that are reimbursed adequately under the consolidated billing rules for Medicare are not reimbursed adequately under the VA 70- 

Percent Program. Examples include services by an attending physician, specialists, 

and emergency transportation. In addition, we can no longer bill Medicare Parts B 

and D for services on this segment of our patient population. In essence, when we 

admit residents who qualify for the VA 70-Percent Program, we incur higher expenses and receive lower reimbursements for services than we are able to bill for 

those same services to other applicable payor sources. 

The VA 70-Percent Program reimbursement is based on the lesser of the prevailing rate as established by the Secretary for Veterans’ Affairs or the average 

daily cost of care for all residents based on actual expenses incurred by the nursing 

home. The average daily cost of care calculation results in a reimbursement skewed 

by the much larger percentage of intermediate care residents in each home as compared with skilled care residents. For example, if 5 percent of the resident population in a given home qualify for the VA 70-Percent Program and 15 percent of 

residents in the home are covered by Medicare, the remaining 80 percent require 

only intermediate or custodial nursing care. The expenses associated with custodial 

care are significantly lower on a per patient day basis than those for skilled care. 

Moreover, as the calculation that follows shows, the VA 70-Percent Program residents incur expenses which are higher than those incurred by our Medicare residents. When the total expenses are divided by the total patient days to obtain the 

‘average daily cost of care,’ the resulting average is much less than the actual cost 

of care for the residents qualifying under the VA 70-Percent Program. 

A comparison between the charges and reimbursements for skilled services billed 

to Medicare and billed to the VA 70-Percent Program follows. 


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Description Medicare VA 70% 

Room & Board $6,572 $6,572 

Attending Physician - 200 

Specialist - 300 

Pharmacy 728 728 

Medical Supplies 380 380 

Oxygen 900 900 

Physical Therapy 1.860 1,860 

Speech Therapy 2,720 2,720 

Laboratory 70 70 

Radiology 150 150 

Inhalation Therapy 16 16 

Total Charges $13,396 $13,896 

Estimated due from Medicare $12,400 - 

Billed to VA 70% Program 7,564 

VA Standard per diem 2,387 

Total Reimbursement $14,787 $7,564 

Revenue Loss $7,223 

As you can see, the current reimbursement methodology does not provide sufficient funding to the State Veterans Homes. Tennessee estimates the loss of 

$338,000 in revenues from May 29, 2009 to the present because of the funding constraints of the VA 70-Percent Program. Please see the attached graphic demonstrations. This substantial loss does not include the realized increase in provision of care 

costs experienced by the State Veterans Homes as prescribed under the VA 70-Percent Program. 

Obviously, the Tennessee State Veterans Homes Board cannot continue to absorb 

this increase in expenses and reduction in reimbursement without dire fiscal consequences. Therefore I urge you to support H.R. 4241. 

Thank you. 

VA 70% MCR A VA Supp MCR plus VA 

Supp Difference Days 

Resident 1 $24,382.00 $48,928.30 $7,445.00 $56,373.30 ($31,991.30) 100 

Resident 2 $24,382 $43,972.74 $7,445.00 $51,417.74 ($27,035.74) 100 

Resident 3 $24,382.00 $39,210.20 $7,445.00 $46,655.20 ($22,273.20) 100 

Resident 4 $19,506 $35,323.00 $5,956.00 $41,279.00 ($21,773.40) 80 

Resident 5 $17,311.22 $27,494.56 $5,285.95 $32,780.51 ($15,469.29) 71 

Total ($118,542.93) 

1/20 

admit 

Resident 6 $0.00 

1/21 

admit 

Resident 7 0 

Used actual 70 percent rate $243.82 vs Actual MCR rate per day per resident including supplement 

Residents that were eligible to access MCR Part A since May-09 


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VA 70% MCR A VA Sup MCR plus VA 

Supp Difference Days 

Resident 1 $23,867.00 $33,227.00 $7,442.00 $40,669.00 ($16,802.00) 100 

Resident 2 $10,024 $12,883.54 $3,256.26 $16,139.80 ($6,115.66) 42 DC 

Resident 3 $23,867.00 $38,623.70 $7,442.00 $46,065.70 ($22,198.70) 100 

Resident 4 $19,332 $29,788.55 $6,028.02 $35,816.57 ($16,484.30) 81 DC 

Resident 5 $6,921.43 $12,140.91 $2,158.18 $14,299.09 ($7,377.66) 29 DC 

Resident 6 $5,251 $12,140.91 $1,637.24 $13,778.15 ($8,527.41) 22 DC 

Resident 7 $23,867.00 23,017.10 7,753.00 30,770.10 ($6,903.10) 100 

Total Total Loss ($84,408.83) 

Used Actual 70 percent Rate for Humboldt $238.67 vs Actual MCR rate per day per resident 

Residents that were eligible to access MCR Part A since May-09 


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VA 70% MCR A VA Supplement MCR with 

VA Difference Days 

x Resident 1 $21,828.00 $23,373.00 $7,656.59 $31,029.59 ($9,201.59) 100 

Resident 2 $20,300 $30,734.47 $7,210.29 $37,944.76 ($17,644.72) 93 

Resident 3 $13,533.36 $22,246.50 $4,800.04 $27,046.54 ($13,513.18) 62 

Resident 4 $1,528 $2,733.78 $542.71 $3,276.49 ($1,748.53) 7 DC 10/16 

x Resident 5 $21,828.00 $41,414.00 $7,753.00 $49,167.00 ($27,339.00) 100 

x Resident 6 $18,336 $36,355.00 6512.52 $42,867.52 ($24,532.00) 84 

Resident 7 $19,429.92 $33,559.00 6900.17 $40,459.17 ($21,029.25) 89 

Resident 8 $16,589 $21,490.00 $5,892.28 $27,382.28 ($10,793.00) 76 

Resident 9 $10,695.72 $16,357.00 $3,798.97 $20,155.97 ($9,460.25) 49 

Total ($135,261.52) 

Used Knoxville VA 70 percent Rate of 

$218.28 vs Actual MCR rate per day per 

resident 

($219,670.35) 

Residents that were eligible to access MCR Part A since 

May-09 


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f 

Prepared Statement of Keith T. Ribbentrop, State Veterans 

Home Liaison Officer, Yukio Okutsu State Veterans Home, Hilo, HI 

Mr. Chairman and Members of the Subcommittee: 

My name is Keith Ribbentrop. I am the State Veterans’ Home Liaison Officer to 

the Yukio Okutsu State Veterans Home in Hilo Hawaii. I am retired from the 

United States Air Force, and as a disabled combat veteran of the Vietnam War, I 

am here today, grateful for the opportunity to advocate for my comrades-in-arms. 

Thank you for the honor to speak on their behalf. 

The Veterans Benefits, Health Care, and Information Technology Act of 2006 

(Pub. L. No. 109–461) authorized the United States Department of Veterans Affairs 

(VA) to make payments to State Veterans Homes that provide nursing home care 

to certain veterans with service-connected disabilities (also known as the 70-Percent 

Program). 

VA regulations implementing section 211(a) of the statute that took effect earlier 

this year purport to provide a higher per diem rate for 70-Percent Program eligible 

veterans. However, the program as implemented has actually resulted in significantly lower payments to many State Veterans Homes. Unless revised, the 70-Percent Program will not provide the actual cost of care to State Veterans Homes despite congressional intent. 

The problem is particularly urgent for states that are Medicare and Medicaid 

(CMS) certified. There are 30 states across the nation with CMS certified Homes, 

one of which is Hawaii. Our Home receives payment for the care of veterans with 

service-connected disabilities for a limited period of time under the Medicare program. However, those veterans eligible for the higher per diem rate are not eligible 

for Medicaid funds. The following table and charts reflect that as the number of veterans eligible for the higher per diem rate increases (1200% in Hawaii since June 

2009), the disparity between per diem and cost increases as well thereby threatening the State Homes’ viability. 


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2009 

70% 

Program Number in Residence 

Total Monthly 

Expenses Pgm. 

Eligible’s 1

Avg Daily 

Expense Pgm. 

Eligible’s

Daily Excess 

Costs

Total Per Diem 

Paid2

Monthly 

Un-Reimbursed 

Expenses 

Feb 1 $ 2,331.00 $ 388.50 $ 57.15 $ 1,988.10 $ 342.90 Mar 1 $ 12,043.50 $ 388.50 $ 57.15 $ 10,271.85 $ 1,771.65 April 1 $ 11,655.00 $ 388.50 $ 57.15 $ 9,940.50 $ 1,714.50 May 1 $ 12,747.75 $ 411.22 $ 79.87 $ 10,271.85 $ 2,475.90 Jun 1 $ 13,950.46 $ 465.02 $ 133.67 $ 9,940.50 $ 4,009.96 Jul 3 $ 32,103.09 $ 785.80 $ 888.85 $ 18,555.60 $ 27,554.40 Aug 5 $ 51,382.62 $ 582.44 $ 1,255.47 $ 30,152.85 $ 38,919.46 Sep 4 $ 59,622.29 $ 496.85 $ 662.01 $ 39,762.00 $ 19,860.29 Oct 7 $ 98,969.32 $ 495.82 $ 1,153.85 $ 67,519.92 $ 35,769.34 Nov 11 $ 129,318.19 $ 485.97 $ 1,704.86 $ 89,695.58 $ 51,145.73 Dec 12 $ 152,088.23 $ 474.91 $ 1,713.12 $ 111,209.28 $ 51,393.63 

1 Actual expenses incurred by 70-Percent Program eligible veterans for the number in-residence days at the State Veterans Home under 

the 70-Percent Program. 2 Daily VA per diem rate from February through October 2009 $331.35; from October 2009 through December 2009 $330.98. 


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I believe the VA has done all that it can under current law. However, the VA’s 

administrative measures only relieve a portion of the financial burden. Hawaii Island, where the State Veterans Home is located, suffers from a critical shortage of 

doctors (see attachment) as well as specialty medical services. This shortage requires transport of a resident 200 miles by air to the island of Oahu where care 

would be available. 

The rapid growth of the 70-Percent Program eligible veterans in our Home is duplicated nationwide. Because of this growth and the financial implications, many 

states have constrained admission of veterans under the new program. The Yukio 

Okutsu State Veterans Home is proud to report that it is nearing capacity. We are 

99 percent filled and soon will need to establish a waiting list. Our Home’s wait list 

is established with priority given to service connected disabled veterans by rank 

order of disability rating. 

The 70-Percent Program has been a blessing for many veterans and their families. 

As the Yukio Okutsu State Veterans Home—Hilo reaches capacity, Mr. Mark 

Moses, State Director, Office of Veterans Services has begun to assess the need for 


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Hawaii’s next State Home. The 70-Percent Program will have a profound impact on 

his planning and implementation. 

The National Association of State Veterans Homes has proposed technical amendments to the 70-Percent Program that are reflected in H.R. 4241, introduced by Representative Michael H. Michaud, a member, House Committee on Veterans’ Affairs. 

The amendments contained in H.R. 4241 will allow all State Veterans Homes greater flexibility for admission and for care of veterans with service-connected disabilities without jeopardizing the future of the Homes. As you and the Committee on 

Veterans’ Affairs deliberate H.R. 4241, please know that it will be beneficial to both 

veterans as well as the Homes built to serve them. I urge you to support this measure. 

Mr. Chairman, thank you for your dedication, and the dedication of the Committee on Veterans’ Affairs in support of our nation’s veterans. 


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Physician Needs Estimate Provided by Hilo Medical Center 

Specialty 

2010 Service 

Area Population 

2010 Adjusted 

Service Area 

Population 1

Total Estimated Physician Need 

Number of 

Existing 

Physicians 

Estimated 

Reduction in 

Practicing 

Physicians 

2010 2

Estimated 

Reduction in 

Practicing 

Physicians 

2011 2

2010 Estimated 

Net Need

2011 Estimated 

Net Need

Hi Low Hi Low Hi Low 

General/Family Practice 85381 63438 20.7 15.9 18 5 3 7.7 2.9 10.7 3.7 General Internal Medicine 85381 63438 18.7 18.1 16 4 2 6.7 6.1 8.7 10.3 Pediatrics 85381 63652 10 7.9 5 1 0 6 3.9 6 6.7 OB/Gyn 85381 77364 9.7 7.7 7 1 0 3.7 1.7 3.7 2.3 Neonatal/Perinatal 85381 74905 0.7 0 0 0 0 0.7 0 0.7 0 Pediatric Subspecialties 85381 79012 1.3 0 0 0 0 1.3 0 1.3 0 Cardiology 85381 77833 5.1 2.5 3 1 0 3.1 0.5 3.1 0 Endocrinology 85381 69637 0.8 0.6 0 0 0 0.8 0.6 0.8 1.2 Gastroenterology 85381 79293 2.7 2.1 3 2 0 1.7 1.1 1.7 0.2 Hematology/Oncology 85381 67733 1.8 2.5 1 1 0 1.8 2.5 1.8 4 Infectious Diseases 85381 74794 0.9 0.7 0 0 0 0.9 0.7 0.9 1.4 Nephrology 85381 76314 1.3 0.9 1 0 0 0.3 -0.1 0.3 -0.3 Pulmonology 85381 74597 1.9 1.1 1 1 0 1.9 1.1 1.9 1.2 Rheumatology 85381 69372 0.8 0.5 0 0 0 0.8 0.5 0.8 1 Allergy & Immunology 85381 79012 0.9 0.7 0 0 0 0.9 0.7 0.9 1.3 Dermatology 85381 70602 2.2 2 2 0 0 0.2 0 0.2 0 General Surgery 85381 58939 5.9 5.7 3 1 1 3.9 3.7 4.9 7.3 Colon & Rectal Surgery 85381 79012 0.3 0 0 0 0 0.3 0 0.3 0 


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Neurology 85381 79012 2.8 1.8 1 1 0 2.8 1.8 2.8 2.6 Neurosurgery 85381 7317 0.1 0.1 0 0 0 0.1 0.1 0.1 0.2 Ophthalmology 85381 92893 5.5 4.4 3 0 0 2.5 1.4 2.5 2.8 Orthopedic Surgery 85381 67989 4.6 4.2 1 1 0 4.6 4.2 4.6 7.4 ENT 85381 55353 1.7 1.8 1 0 0 0.7 0.8 0.7 1.6 Plastic Surgery 85381 79012 1.6 0.9 0 0 0 1.6 0.9 1.6 1.8 Thoracic Surgery 85381 79012 1.3 0.7 0 0 0 1.3 0.7 1.3 1.3 Urology 85381 63609 2 2 1.5 0.5 0 1 1 1 1.5 Psychiatry 85381 69859 9.2 11.1 3 2 0 8.2 10.1 8.2 18.2 Rehabilitation 85381 79012 1.6 1.3 2 0 0 -0.4 -0.7 -0.8 -1.4 

1 Population adjusted for market share. 2 Reduction estimates based on number of physicians who will turn 65 within time frame. 


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Prepared Statement of Gary Bermeosolo, Legislative Officer, National 

Association of State Veterans Homes, and Administrator, Nevada State 

Veterans Home, Boulder City, NV 

Mr. Chairman and other Distinguished Members of the Subcommittee on Health 

of the U.S. House of Representatives Committee on Veterans’ Affairs, thank you for 

inviting me to testify at this legislative hearing. 

As the Legislative Officer of the National Association of State Veterans Homes 

(NASVH) and as the Administrator of the Nevada State Veterans Home (NSVH), 

I am honored to be here with you this afternoon to request your support for H.R. 

4241, a bill to amend chapter 17 of title 38, of the United States Code, to allow for 

increased flexibility in payments for state veterans homes. 

When Public Law 109–461 passed in 2006, its intent was to correct the inequities 

that existed in the system, whereby veterans with a 70 percent or greater service 

connected disability rating couldn’t come to a state veteran home at no cost, but 

they could go to a community nursing home at no cost. This was a well-intended 

law and we thought it would correct this inequity. 

However, when Public Law 109–461 took effect, on April 29, 2009, the regulations 

implementing it created more inequities than it corrected. In essence, state veterans 

homes are being offered a flat rate to assume all responsibility for the veteran’s 

care, which has and will continue to create financial hardships on state veterans 

homes. 

Previously, we were able to admit veterans with a 70 percent or greater service 

connected disability as ‘‘private pay’’ residents. Now, we are being required to admit 

them under a program intended to cover their total cost of care, but one which actually places the cost of their care on the state. Consequently, many states can’t admit 

these veterans because of this financial burden. 

It is difficult to calculate the actual cost of this burden and/or the number of 

states currently impacted because many states aren’t accepting these veterans because they don’t have the funds to provide the required care. They are simply unwilling to assume the risk by exposing their states to the financial uncertainties of 

this new program. 

Let me assure you, this is not an issue confined to any one state. This is a nationwide problem. NASVH is comprised of the 137 state veterans homes across the 

country. Since Public Law 109–461 was implemented, I have been contacted by administrators and directors of state home programs from all over the United States 

requesting my assistance, as NASVH’s Legislative Officer, with the financial challenges this law has created for their states. 

And, while I am very concerned as the Legislative Officer for NASVH, I am also 

very concerned as the Administrator of the Nevada State Veterans Home in Boulder 

City. Let me share with you just one of the many experiences I have had in Nevada 

in recent months. 

The wife of an applicant, who we’ll call Mr. Disabled Veteran (D.V.), came to our 

Home on July 21, 2009, seeking admission for her husband, a World War II veteran. 

She was desperate to get him in our Home where she could be confident he would 

receive quality care and have opportunities to socialize with other vets who he could 

relate to. 

We gave her a tour and brought her back to the office to review our Home’s offerings and application process. As we began discussing our daily cost of care, Mrs. 

D.V. indicated her husband had a 100 percent service connected disability rating 

and, consequently, she was not being charged for his care at the community nursing 

home where he currently resided. We explained to Mrs. D.V. the difference between 

the community nursing home’s and the state home program’s reimbursement arrangement with VA and shared with Mrs. D.V. that we cannot, under the current 

law, provide care for her husband because of the potential financial implications for 

the State of Nevada. 

At this point, Mrs. D.V. began crying and asked how this could be possible, since 

we aren’t just a nursing home, but a nursing home especially for veterans. I gave 

Mrs. D.V. a history of how we arrived at this point and indicated I was working 

with other state home programs and Congress to fix this problem, but until it’s 

fixed, we simply can’t assume the risk of admitting 70 percent or more disabled veterans. 

Mrs. D.V. then reached in her purse and retrieved her check book. As she waived 

it in the air she stated, ‘‘But I’ll pay for his care if you’ll just admit him.’’ We then 

shared with her that VA Regulations won’t allow her to pay for the cost of her husband’s care. She began sobbing as she tried to come to terms with what we were 

telling her. At this point, I looked this woman in the eyes and I promised her I 

would do everything possible to get this fixed. 


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As our meeting concluded, we encouraged Mrs. D.V. to check back with us periodically to see if the law had been fixed. Mrs. D.V. called me back in August, then 

again in September, and again in October, and again in November, each time asking 

if ‘‘the 70 percent thing’’ was fixed yet. Each time, we had to tell her ‘‘no, but we’re 

still working on it.’’ 

Mrs. D.V. doesn’t call me anymore. Her husband died on December 16, 2009, 

never able to access the care he deserved as a 100 percent service connected disabled veteran. 

It is impossible to convey how difficult it is to turn these folks away. State home 

administrators across the country are unwilling to assume the risk of bankrupting 

their programs, which would have the catastrophic effect of displacing their current 

residents. 

Mr. Chairman and Members of the Committee, I implore you—please correct this 

injustice. We are turning away the people who most deserve and need care in state 

veterans homes. H.R. 4241 corrects the inequities and achieves the end result we 

were all hoping for and, most importantly, that our veterans deserve. 

Mr. Chairman, this concludes my statement. Thank you for permitting me to testify today on behalf of the National Association of State Veterans Homes and the 

Nevada State Veterans Home Program. I will be pleased to answer any questions. 

f 

Prepared Statement of Kelley J. Kash, Chief Executive Officer, 

Maine Veterans’ Homes, Augusta, ME 

Mr. Chairman, and Members of the Subcommittee, thank you for inviting me to 

testify here today at this hearing on H.R. 4241. My name is Kelley J. Kash, and 

I am the Chief Executive Officer of the Maine Veterans’ Homes. The Maine Veterans’ Homes strongly supports H.R. 4241. 

The Maine Veterans’ Homes is a public non-profit system of State Veterans 

Homes established by the government of the State of Maine. We currently operate 

640 skilled nursing, long-term care nursing, and domiciliary beds at six locations 

throughout the State of Maine, at Augusta, Bangor, Caribou, Scarborough, South 

Paris, and Machias. The Maine Veterans Homes operates its nursing facilities entirely with its own employees, under a Board of Trustees appointed by the Governor 

of Maine, and we have no management arrangements with private corporate entities. 

The Maine Veterans’ Homes is located in one of the 30 States in the nation that 

have Medicare-certified and/or Medicaid-certified State Veterans Homes. In fact, all 

nursing facilities of the Maine Veterans’ Homes are both Medicare and Medicaid 

certified, and we have operated successfully in this manner for almost 30 years. As 

such, the Maine Veterans’ Homes provides in conjunction with the Medicare and 

Medicaid payment systems a wide range of post-acute, post-operative, and rehabilitative services to Maine veterans, at no cost, or at very low cost, to such veterans. 

Such post-acute, post-operative and therapeutic care is known in the health care 

community as ‘‘skilled nursing care.’’ The Maine Veterans’ Homes provides a lot of 

skilled nursing care to Maine veterans, and as you have heard here today, skilled 

nursing care is precisely the type of nursing care for which the VA’s new 70-Percent 

Program causes a State Veterans Home to incur the greatest financial losses. 

The more skilled nursing care that a State Veterans Home provides to veterans 

under the 70-Percent Program, the larger are its losses. In fact, the Maine Veterans’ 

Homes has estimated that, based on the demographics of the Maine Veteran Population, if we were to admit every veteran in Maine that reasonably could seek admission to the Maine Veterans’ Homes under the 70-Percent Program, the Maine 

Veterans’ Homes would sustain a net loss of between $8 and $16 million per year, 

and be bankrupt within 11⁄2 to 3 years. Concerning this fact, it is important to note 

that the 70-Percent Program in its final form, contrary to Senator Akaka’s original 

intent, does not serve only those ‘‘severely-disabled service-connected veterans’’ with 

a 70 percent or greater disability. The 70-Percent Program serves any veteran with 

a service-connected disability of as low as 10 percent if that service-connected disability in any way requires nursing home care. Furthermore, if a State Veterans 

Home were to provide any significant amount of skilled nursing care, post-acute 

care, post-operative care, or therapeutic care to a veteran under the 70-Percent Program (to say nothing of kidney dialysis services, hospice services, therapeutic radiation, oncology services, expensive drugs, or even dentistry) a State Veterans Home 

is almost guaranteed of incurring substantial financial losses under the 70-Percent 

Program. 


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This is why the testimony of the President of the National Association of State 

Veterans Homes (NASVH), Colleen Rundell, from the State of Vermont, argues the 

VA’s numbers simply do not add up and that the VA’s 70-Percent Program substantially underpays a State Veterans Home for providing skilled nursing care to service-connected disabled veterans. This is why the testimony from the State of Hawaii 

State Veterans Home demonstrates that it is losing money at the rate of more than 

$600,000 per year, in its only home, under the 70-Percent Program, and has lost 

money consistently under the 70-Percent Program since the Program became effective on May 29, 2009. This is why the State of Hawaii previously has called the 70- 

Percent Program a ‘‘financial disaster.’’ This is why the State of Tennessee reports 

that its State Veterans Homes are currently incurring losses of approximately $1.4 

million per year under the 70-Percent Program and anticipates that these losses will 

increase. This is why NASVH’s National Legislative Director from the State of Nevada has called the reimbursement methods under the VA’s 70-Percent Program a 

‘‘nation-wide problem,’’ and why the Nevada State Veterans Home has entirely 

avoided admitting any service-connected disabled veteran under the 70-Percent Program since the Program became effective. This is also why the Maine Veterans’ 

Homes has admitted no veteran intentionally under the 70-Percent Program since 

the Program became effective. This is exactly the opposite result that Congress 

hoped to achieve by the enactment of the legislation that became the 70-Percent 

Program. 

In order to illustrate the financial losses that would be incurred by the Maine Veterans’ Homes if we were to provide skilled nursing care to substantial numbers of 

service-connected disabled veterans at our nursing facilities under the 70-Percent 

Program, as opposed to being reimbursed under Medicare or Medicaid, we pulled 

the files of six typical skilled nursing residents at our facilities. These files showed 

that we would lose an average of $238 per resident per day under the VA’s 70-Percent Program compared to existing sources of funds such as Medicare or Medicaid. 

These data are consistent with the facts being reported here today by other Medicare-certified and Medicaid-certified State Veterans Homes and also by such homes 

in other States throughout the nation. The only State Veterans Homes in the nation 

that have any hope of not incurring substantial financial losses under the VA’s new 

70-Percent Program are those State Veterans Homes which are not Medicare or 

Medicaid-certified or which only provide a minimal amount of skilled nursing care. 

The financial summary of our investigations of actual resident records is appended 

to my testimony. 

Since the 70-Percent Program became effective on May 29, 2009, we have met several times with VA officials including Dr. James Burris, who testified before you 

today. Frankly, Dr. Burris does not understand the problem that the 70-Percent 

Program poses for State Veterans Homes that provide skilled nursing services under 

Medicare and Medicaid, and he does not understand the enormity of this problem 

for the majority of the States in the nation. In simple language, the VA’s 70-Percent 

Program does not pay State Veterans Homes enough to provide skilled nursing care 

to veterans. 

In short, in implementing the 70-Percent Program, the VA replaced a payment 

system that pays adequately for skilled nursing care at State Veterans Homes 

(Medicare/Medicaid) with a payment system that pays inadequately for skilled nursing care at State Veterans Homes (the 70-Percent Program). This has caused Medicare and Medicaid-certified State Veterans Homes to avoid or refuse admission to 

service-connected disabled veterans requiring skilled nursing. This is clearly not 

what was intended by Congress when it passed the legislation that eventually became the 70-Percent Program. 

To make matters worse, shortly after this hearing was scheduled, the Togus VA 

Medical Center at Augusta, Maine, on February 1, 2010, advised the Maine Veterans’ Homes by telephone, that upon the oral ‘‘direction’’ of the VA central office, 

it was withholding all VA per diem payments from the Maine Veterans’ Homes because it suspected that some eligible veterans in Maine were not being enrolled 

mandatorily in the 70-Percent Program—the same program that could cost Maine 

Veterans’ Homes an estimated minimum of $8 million per year. The VA’s illegitimate and wholesale withholding of all VA per diem payments without justification 

by itself could have cost the Maine Veterans’ Homes an estimated $800,000 per 

month unless we had successfully complained to the VA that it was unlawfully withholding funds from us. The VA in the past has said that it could cure the problems 

with the 70-Percent Program administratively, but it has not done so. The result 

has been a 70-Percent Program in chaos. We have simply run out of patience with 

the VA. The VA can no longer hide its head in the sand from the disarray that it 

has created for our nation’s veterans and our nation’s State Veterans Homes. 


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What should be done about this? First, Congress should allow State Veterans 

Homes the option of continuing to receive payments from Medicare or Medicaid, 

plus the basic (lower) VA per diem rate for the care of service-connected disabled 

veterans, until the VA can devise a permanent system and adopt regulations under 

the 70-Percent Program to pay State Veterans Homes at rates comparable to those 

available from Medicare and Medicaid, plus the basic (lower) VA per diem rate. The 

VA should be required also to pay any co-pay required by a veteran for the receipt 

of Medicare or Medicaid benefits under the 70-Percent Program, so that such care 

is at no cost to the veteran. ‘‘Payment in full’’ by the VA to a State Veterans Home 

for a veteran’s nursing home care means ‘‘payment in full’’ to a State Veterans 

Home for a veteran’s nursing home care. Second, Congress should allow State Veterans Homes to use the existing VA Community Nursing Home Contract program 

so that we can provide immediate long-term care services to service-connected disabled veterans at no cost to such veterans. 

The enactment of H.R. 4241 would give the VA the authority to accomplish both 

of these goals quickly, and we urge its speedy passage. We thank the Chairman and 

members of the Subcommittee for the opportunity to testify today, and we look forward to working with both Congress and the VA to effect a permanent solution to 

the substantial financial problems of the VA’s current 70-Percent Program. 

Maine Veterans’ Homes—Sample of 70-Percent Disabled Veterans 

Admissions 

Resident A B C D E F 

Payor Medicare Private Pay Medicaid Medicare Medicare Medicaid 

Days 89 30 30 14 31 31 

Room & Board $24,933 $8,310 $7,560 $3,878 $8,990 $8,122 

Pharmacy $4,273 $4,311 $5,605 

Lab $222 

IV Therapy $1,465 

Radiology $298 $1,193 

Therapy (PT, OT, & ST) $20,610 $2,450 $4,670 $8,540 $11,490 

Total Charges $50,038 $10,760 $7,560 $14,622 $24,328 $19,612 

Total Reimbursements $43,236 $7,462 $5,350 $7,752 $15,875 $12,345 

Difference ($6,802) ($3,298) ($2,210) ($6,870) ($8,453) ($7,267) 

VA basic rate per diem $5,135 $2,223 $2,233 $1,042 $2,307 $2,307 

Difference after per 

diem ($1,667) ($1,075) $23 ($5,828) ($6,146) ($4,960) 

VA ‘‘Higher Per Diem’’ 

Payment $21,154 $7,931 $6,479 $3,328 $7,368 $7,368 

Difference ($28,884) ($2,829) ($1,081) ($11,294) ($16,960) ($12,244) 

Average daily reimbursement (includes 

basic rate per diem) $543 $323 $253 $628 $587 $473 

VA ‘‘Higher Per Diem’’ 

Rate (lesser of prevailing or OMB A–87) $238 $264 $216 $238 $238 $238 

Difference ($305) ($59) ($37) ($390) ($349) ($235) 


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Maine Veterans’ Homes—Projected Losses from 70-Percent Disabled 

Veterans Program Admissions 

Resident A B C D E F 

Primary Payor Medicare Private Pay Medicaid Medicare Medicare Medicaid 

Days 89 30 30 14 31 31 

Reimbursements (with 

basic rate per diem) $48,371 $9,685 $7,583 $8,794 $18,182 $14,652 

VA ‘‘Higher Per Diem’’ 

Payments $21,154 $7,931 $6,479 $3,328 $7,368 $7,368 

Total Reimbursements $107,267 

Total 70% Program 

HPD Payments $53,628 

Difference ($53,639) 

Total Bed Days 225 

Average Loss per Resi- dent Day $(238) 

f 

Prepared Statement of James F. Burris, M.D., Chief Consultant, 

Geriatrics and Extended Care, Veterans Health Administration, 

U.S. Department of Veterans Affairs 

Good afternoon Mr. Chairman and Members of the Committee. I appreciate the 

opportunity to appear before you today to discuss H.R. 4241 and the mechanism by 

which the Department of Veterans Affairs (VA) supports the States’ operation of 

their nursing homes for mandatory Veterans. I will use the term ‘‘mandatory Veterans’’ to refer to Veterans who have a service connected disability rated 70 percent 

or more or need nursing home care for their service connected disability. Under the 

State home program, VA provides support to States to construct and operate nursing homes and domiciliaries for the care of Veterans. In return, State homes provide 

nursing home care to many of our Nation’s Veterans. Today, there are 137 State 

homes, and every State operates at least one. Last fiscal year, 27,413 Veterans were 

cared for in these homes. 

IMPLEMENTATION OF NEW PER DIEM FOR MANDATORY VETERANS 

For many years prior to the enactment of Public Law 109–461, VA paid the full 

cost of these Veterans’ care in VA or private nursing homes but not in State homes. 

By law, VA could only pay one rate for all eligible Veterans in a State home. The 

rate was the lesser of one-half of the cost of the care in the State home or an 

amount established by VA each year. This changed when, in 2006, Congress directed VA to pay State nursing homes a new rate for mandatory Veterans: the lesser of a prevailing rate determined by VA or the actual cost of care in the State 

home. VA regulations implementing this congressional mandate were effective May 

29, 2009, with provision for retroactive payment to March 21, 2007. 

Although a number of States are satisfied with the new rates VA pays for mandatory Veterans, several have reported problems. Some States report that after the enactment of Public Law 109–461, they now receive smaller total payments for the 

care of these veterans because they are no longer able to bill Veterans or other 

payors. Some States report that the VA payments do not cover their actual costs 

and as a result, they cannot afford to admit mandatory Veterans anymore. Other 

States reported that VA facilities stopped providing specialty physician services to 

their mandatory Veterans. We are committed to taking steps to ascertain circumstances where the intent of Public Law 109–461 is not being met, and work 

with the State home program for remedies to avoid any adverse impact upon Veterans. 

In an effort to further understand these reported difficulties, VA has met with 

representatives of the National Association of State Directors of Veterans Affairs, 

the National Association of State Veterans Homes, the National Governors Association, congressional staff. We believe that with the help of the State Veterans Homes 

represented here today there are non-legislative steps that can be taken to resolve 

the difficulties reported by the States. We have asked States to share with us supVerDate Nov 24 2008 07:21 Aug 25, 2010 Jkt 055233 PO 00000 Frm 00044 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\55233.XXX GPO1 PsN: 55233

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porting documentation that demonstrates how their actual costs for the care of these 

veterans exceed the allowable VA per diem payment under current law. With this 

information, we will be better positioned to understand the impact of Public Law 

109–461 and address their concerns. 

VA has already taken steps toward resolving one of those reported difficulties. On 

October 19, 2009, VA issued guidance to its field facilities that the ‘‘full per diem 

payment’’ to State homes covers nursing home services only and that VA facilities 

must continue to provide most specialty care to mandatory Veterans as they did 

prior to the initiation of the new payments. That clarification eliminated one source 

of confusion. 

Further, we believe that some States need assistance in understanding the provisions of the Office of Management and Budget (OMB) Circular A–87, which States 

must use to compute their actual cost of care for mandatory Veterans. VA has offered to work individually with States to improve their understanding. We will continue to work with the State homes and our other partners to ensure that Veterans 

are being served appropriately. 

H.R. 4241 

H.R. 4241 contains several provisions intended to resolve the difficulties that 

States have with the new VA payments for mandatory Veterans. Section 1(a)(3) of 

the bill would authorize VA to enter into agreements with State homes to provide 

care for mandatory Veterans under VA’s contract nursing home care authority in 

lieu of making per diem payments. As noted, different State homes have widely 

varying circumstances and patient populations – without a complete understanding 

of how State homes are currently being impacted by Public Law 109–461, we are 

unable to comment on whether a contract mechanism would be a viable solution to 

the reported problems. 

Section 1(b) of the bill would delete the requirement in current law that VA pay 

the actual cost of care if that cost is less than the prevailing rate (i.e., VA would 

simply pay the prevailing rate, which for most States is higher than the calculated 

actual cost). VA opposes this provision, as it would result in VA paying more than 

the actual cost of care. 

Section 1(c) would provide that VA’s ‘‘full per diem’’ payments for mandatory Veterans’ nursing home care is payment in full only with respect to other VA payments 

under title 38, United States Code. State homes could thus bill other payors for this 

care, including the mandatory Veterans themselves. VA’s payment is intended to be 

payment in full with respect to the Veteran, and elimination of Veteran billing (and 

the resulting disparity with VA Community Living Centers and contracted arrangements) was part of the purpose of the changes made in Public Law 109–461. We 

therefore oppose this provision. 

Section 1(d) would permit State homes to bill Medicare and Medicaid for nursing 

home care provided to mandatory Veterans without these payments being reduced 

by the amount of the VA payments. As noted above, VA’s payment for mandatory 

Veterans is intended to be payment in full for nursing home care. Because this provision could result in the Federal government making duplicate payments for the 

same care, we oppose it as well. 

We anticipate that enactment of H.R. 4241 would require additional VA expendi- tures of approximately $17.5 million in the first year and more than $200 million 

over 10 years. 

Thank you once again for the opportunity to testify. We are prepared to address 

your questions. 

f 

Statement of Jacob B. Gadd, Assistant 

Director for Program Management, Veterans Affairs and 

Rehabilitation Commission, American Legion 

Mr. Chairman and Members of the Subcommittee: 

Thank you for the opportunity to submit The American Legion’s views on H.R. 

4241, to amend Chapter 17 of title 38, United States Code (USC), to allow for increased flexibility in payments for State Veterans Homes. Thank you Mr. Chairman 

for introducing this much needed and greatly appreciated proposal to improve the 

Department of Veterans Affairs’ (VA’s) per diem payments to State Veterans Homes 

for providing quality nursing home care to service-connected disabled veterans. 

When enacted this legislation would improve per diem payments from the Department of Veterans Affairs (VA) to State Veterans Homes which reflects the actual 


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geographic cost of care furnished in a non-VA nursing home made payable at the 

prevailing rate. 

Title 38, United States Code (USC) authorizes VA to pay per diems for care in 

State Veterans Homes for the care of service-connected disabled veterans awarded 

a VA disability rating of 70 percent or greater. Currently, VA pays State Veterans 

Homes a per diem that covers approximately one-third of the cost of providing nursing home care for eligible veterans. 

Public Law (PL) 109–461, the Veterans Benefits, Health Care, and Information 

Technology Act of 2006, authorized VA to pay State Veterans Homes to provide 

nursing home care to veterans with service-connected disabilities. This program 

commonly was referred to as ‘‘the 70-Percent Program’’ within the State Veterans 

Home community. The original intent of the program was to amend PL 106–117, 

the Veterans Millennium Health Care and Benefits Act of 1999, to permit State Veterans Homes to provide the same no-cost care to veterans as provided under the 

VA’s Veterans Health Administration’s Community Nursing Home Provider Agreements. Eligibility for ‘‘the 70-Percent Program’’ was expanded to any veteran who 

has a service-connected disability needing nursing home care for their disability. 

Regrettably, the final VA regulation actually resulted in significantly lower payments and fails to cover the actual cost of nursing home care because the calculations of ‘‘the daily cost of care’’ cannot include any medically-necessary services provided outside of the State Veterans Homes, which covers the spectrum from chemotherapy to dialysis to specialized care to just x-rays. Therefore, the State Veterans 

Homes must forfeit any allowable Centers for Medicare and Medicaid Services 

(CMS) reimbursements for these medical treatment and services, to include those 

covered under Medicaid, Medicare Part A, Part B or Part D. 

Because of this fiscal discrepancy, the National Association of State Veterans 

Homes (NASDVA), which represents the 137 state veterans homes throughout our 

nation, approved a resolution requesting Congress pass a clarification amendment 

to Section 211, Title II of the Veterans Benefits, Health Care and Information Technology Act of 2006 (PL 109–461) postponing the mandatory implementation of the 

program. 

The American Legion supports legislation to amend Subchapter V, Chapter 17, 

title 38, USC to provide clarification of CMS and VA per diem reimbursements to 

State Veterans Homes for nursing home care. The American Legion supports legislation to increase VA’s per diem payments to a rate of 50 percent of the national 

average cost of providing care in a State Veterans Home to more closely align with 

the CMS rate. 

Historically, VA has had a long and beneficial relationship with State Veterans 

Homes and was able to negotiate nursing home care costs at a much lower rate than 

other local community providers or VA Nursing Home Units. The American Legion 

recommends Congress treat the full needs of veterans within State Veterans Homes 

and not rely on state budgets to offset costs of eligible veterans. 

The American Legion believes that under the provisions of ‘‘the 70-Percent Program,’’ enrollment for nursing home care in State Veterans Homes will result in significant budgetary shortfall for each eligible veteran admitted. The unintended consequences could very well deter or severely limit State Veterans Homes’ willingness 

to accept eligible service-connected disabled veterans. This unfortunate scenario 

would require VA to consider more costly alternatives. 

The American Legion appreciates the congressional intent in the original VA per 

diem program, which expanded eligibility for any veteran with a VA disability rating equal to or greater than 10 percent; however, the reimbursed costs of care must 

reflect the full continuum of care for services delivered while residing in State Veterans Homes. These same costs are routinely applied to veterans utilizing VA Domiciliaries or private Nursing Homes in the community. The American Legion urges 

Congress to conduct a thorough review of ‘‘the 70-Percent Program’’ and to authorize 

VA to pay State Veterans Homes for the ancillary costs needed by service-connected 

disabled veterans. 

Mr. Chairman and Members of the Subcommittee, The American Legion sincerely 

appreciates the opportunity to submit testimony. Thank you. 

f 

Statement of Raymond C. Kelley, National 

Legislative Director, American Veterans (AMVETS) 

Chairman Michaud, Ranking Member Brown, and Members of the Subcommittee, 

thank you for the opportunity to submit for the record AMVETS’ views regarding 

the ‘‘Increased Flexibility in Payments for State Veterans Homes,’’ H.R. 4241. 


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In 2006, Congress approved payment of differing per diem rates to State Veterans 

Homes that provide nursing home care for service-connected veterans through the 

‘‘Veterans Benefits, Health Care, and Information Act of 2006.’’ The intent of the 

act was to pay higher per diem rates, however, once enacted the payments to many 

of the State Veterans Homes did not cover the cost to care for these veterans. Without immediate intervention, the current rate could threaten the ability of many 

State Veterans Homes to function financially. 

Without implementing H.R. 4241, inadequate funding will continue to cause 

states to not take additional veterans into their facilities because of funding shortages as well as provide only 70 percent of the funding needed to care for the veterans who are already in these homes. 

Our veterans have earned and deserve only the highest quality of care, and under 

the current regulation they do not. AMVETS wholly supports H.R. 4241 and its effort to fix the unintended funding shortage to so many State Veterans Homes. 

Mr. Chairman, this concludes my testimony and I will be happy to answer any 

questions you might have. 

f 

Statement of Hon. Henry E. Brown, Jr., Ranking Republican 

Member, Subcommittee on Health, and a Representative in 

Congress from the State of South Carolina 

I want to thank Chairman Michaud for holding this hearing to discuss H.R. 4241, 

a bill he introduced to allow for an increase in flexibility regarding payments to 

State veterans homes. 

The partnership between the Federal Government and States to provide nursing 

home care to a broad range of veterans is a long-standing and honored tradition of 

cost sharing. 

To my understanding, the intent of H.R. 4241 is to provide a remedy for problems 

certain State homes are experiencing with the implementation of what is known as 

‘‘the 70-Percent Program.’’ The program, established under Public Law 109–461, requires VA to reimburse State homes at a higher rate for the cost of care provided 

to veterans with a 70 percent or higher service-connected condition. 

The 70-Percent Program was meant to provide equity of access to VA resources 

for service-connected veterans residing in State Homes. However, despite our best 

intentions, this initiative has regrettably resulted in unintentional consequences. 

The 70-Percent Program was meant to assist State Veterans Homes in providing 

the highest quality nursing home care to veterans. And, if the 70-Percent Program 

is in fact doing the opposite and making it harder to meet that worthiest of goals, 

then it is a problem I am anxious to correct. 

I look forward to hearing from our panelists as we examine this issue and am 

very hopeful that as a result of this hearing, we will be able to find a way to resolve 

this issue without the need of a legislative remedy. 

I thank our witnesses for their time and participation. 

f 

Statement of Adrian M. Atizado, Assistant 

National Legislative Director, Disabled American Veterans 

Mr. Chairman and Members of the Subcommittee: 

On behalf of the more than 1.3 million members of the Disabled American Veterans (DAV) and its Auxiliary, I wish to express my appreciation for this opportunity to present the Subcommittee our views for the record on legislation pending 

before the Subcommittee. Mr. Chairman, as you know, DAV is an organization devoted to advancing the interests of service-connected disabled veterans and their dependents and survivors. For more than eight decades, the DAV has devoted itself 

to a single purpose: building better lives for our nation’s disabled veterans and their 

families. 

First, DAV wishes to thank this Subcommittee for establishing and helping enact 

what became section 211 of Public Law 109–461, the Veterans Benefits, Health 

Care, and Information Technology Act of 2006. This Act validated and completed the 

1999 Congressional decision to provide seriously disabled service-connected veterans 

a guaranteed benefit of Department of Veterans Affairs (VA) nursing home care if 

their need for such care was based on a service-connected disability or for any condition if they were 70 percent or more disabled from service-connected disabilities. 

The Act extended that eligibility to these high-priority veterans in the nation’s 137 

state veterans homes. 


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H.R. 4241, a bill introduced by the Chairman, would amend chapter 17 of title 

38, United States Code, to allow for increased flexibility in payments to State veterans homes for the care of service-connected veterans. DAV has a longstanding resolution, No. 238, adopted by our membership at our most recent National Convention, as follows: ‘‘[i]n accordance with Public Law 109–461, VA [must] pay the full 

cost, on an equitable basis, for the care of veterans in need of State Home nursing 

care for a service-connected disability, and for any disability of a veteran with a 

service-connected disability rated at 70 percent or more.’’ Therefore, we support the 

purposes of this bill, but point out some concerns that should be addressed before 

final passage. 

Section 1 of the bill would make seven technical changes to existing statutory language governing VA’s authority to reimburse state veterans homes their cost of care 

for service-connected veterans resident in state homes. One primary purpose of the 

amendment would give the Secretary a new discretionary authority to employ the 

authority of section 1720 of title 38, United States Code, as a basis for entering into 

payment agreements with a state home caring for service-connected veterans. Another purpose of the section would replace the payment rate determination in existing law, currently subsiding in subsection 1745(a)(2), with a linkage to the prevailing geographic rate paid by VA under section 1720 to community nursing homes 

under contract with VA for the care of eligible veterans. A final focus of the amendment would be to circumscribe VA’s reimbursement policy so that some state veterans homes may continue to participate in Medicare and Medicaid reimbursement 

programs. Continuation of this participation was cast into doubt with issuance of 

VA instructions under the new reimbursement program for service-connected veterans in state homes. 

Public Law 109–461 was enacted in December 2006, but unfortunately VA only 

promulgated regulations to carry out its intent in April 2009. Since publication of 

these regulations, Mr. Chairman, we have been informed by the administrators of 

some state facilities that the ‘‘full’’ reimbursement rates governed by VA regulations 

will net some state veterans facilities less than their combined payments (from veterans, their state governments, the Department of Health and Human Services, and 

from VA under the traditional per diem payment subsidy) received before these regulations were issued. Your bill is intended to remedy this inequity. 

Current law establishes state veterans home reimbursement rates for service-connected veterans using two formulas: a geographically adjusted per diem rate established by the Secretary as a corollary to the rates VA currently pays community 

nursing homes; or, a rate determined by the administrator of a state veterans home 

based on the calculated daily cost of care at that home. Existing law requires the 

Secretary to reimburse state veterans homes for the care of service-connected veterans at the lesser of these two rates. 

As we understand it, these rate choices available to VA and the state veterans 

homes have been discovered to be complicated significantly by the governing financial and accounting policy of the Office of Management and Budget as expressed in 

OMB Circular A–87. This circular establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments. Under the rules of 

this circular, a state home in determining its daily cost of care, cannot include in 

that cost structure the depreciation of buildings that were recipients of VA construction grants. As stated in the circular, ‘‘[t]he computation of depreciation or use allowances will exclude: . . . (2) Any portion of the cost of buildings and equipment 

borne by or donated by the Federal Government irrespective of where title was 

originally vested or where it presently resides.’’ This restriction on counting depreciation as a part of a home’s daily cost of care significantly depresses the payable 

reimbursement rates. As a result of the state homes’ excluding these significant 

amounts, the rates determined by the existing statutory formula will invariably become the OMB Circular A–87-determined rates. Therefore, in the view of the National Association of State Veterans Homes and other observers, the current statutory language in section 1745(a)(2) is unworkable for the purpose intended by Congress. The unworkability of these rates has served as a denial of access to nursing 

home care in state extended care facilities to the highest priority veterans, those 

who need nursing home care for residuals of chronic illnesses and injuries they incurred in military service to America. 

While your bill would appear to us to address the problems in the current statutory language and VA’s current regulations, and would provide sharper guidance to 

VA in amending those regulations, we are concerned that the language of this bill 

may not alter the impact of the OMB policy that governs the overall federal-state 

cost accounting relationship. We ask that the Subcommittee consider requesting 

counsel of VA and OMB to assure the Subcommittee that the proposed language of 


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your bill to restructure section 1745 will have its intended outcome of permitting 

disabled service-connected veterans to be reimbursed equitably and fully covered by 

state veterans homes. 

Mr. Chairman, this concludes DAV’s testimony. Again, we thank the Subcommittee for its leadership and for requesting our views on this legislation. 

f 

Statement of Linda S. Schwartz, RN, MSN, DrPH, FAAN, 

Senior Vice-President, National Association of State Directors of Veterans 

Affairs, and Commissioner, Connecticut Department of Veterans Affairs, 

Rocky Hill, CT 

NASDVA is an organization with a history dating back to the Second World War. 

Our membership is composed of State Directors of Veterans Affairs and State Department of Veteran Affairs staff. Our members represent each State as well as the 

District of Columbia, American Samoa, Northern Mariana Islands, Puerto Rico and 

the Virgin Islands. 

As you may know each State has a designated ‘‘Office of Prime Responsibility’’ for 

service to veterans that is uniquely situated to be a vital resource which augment 

Federal programs, improve the identification of needs, coordinate local resources 

and ultimately enhance the quality of care and services to America’s veterans now 

and in the future. NASDVA is a rich resource which had not been fully recognized 

nor utilized in caring for America’s returning military/veterans and their families. 

Collectively State governments commit more than $4 billion annually, which makes 

them second only to the Federal VA, in resource allocations to provide programs, 

benefits and services to the men and women who serve and defend our nation. 

Unlike ‘‘Veteran Service Organizations’’ State Departments are government agencies not membership organizations. Our members are tasked by their respective 

State with the responsibility to address the needs of all veterans irrespective of time 

in service, branch of military or disability status. On a daily basis, State Directors 

are confronted with unique situations which could not possibly be addressed in a 

timely manner by larger systems like DoD and VA. State Directors are held accountable by the citizens of their individual State and do effect changes and solve 

problems because they know who, where and how to orchestrate a successful outcome at the local level. 

In many respects, all veterans and their needs are our agenda. Over 28,000 Nursing Home beds come directly under the administrative responsibilities of our members which means the subject of today’s hearing is of major concern to our members 

because they bear the consequences of the recently implemented Regulations which 

are the focus of this hearing today. We appreciate this opportunity to provide testimony and comments on today’s issues which are extremely important to our members. 

Per Diem Reimbursement in State Veterans Homes 

Under the Millennium Health Care Act of 1999, Congress, in the name of the 

American people, directed the Department of Veteran Affairs (VA) to pay for nursing home care for veterans with a service connected disability rating of 70 percent 

or more and veterans who have sustained service-connected disabilities that require 

nursing home care. While VA provides full cost of care in either a VA or community 

contracted nursing home this has not been the case for State Veterans Homes. Not 

only is this a costly disparity in applying the per diem payments based on the facility in which a veteran receives their care, it penalizes veterans in State Homes. Despite the intent of Congress, over ten years have passed and the uniform application 

of this benefit has not been implemented. 

For years, NASDVA has consistently supported equity in the per diem payment 

system to veterans regardless of where they receive their care. We believe that Congress authorized the benefit to the veteran, not the facility in which they receive 

their care. The leadership and members of NASDVA have come, year after year 

both in testimony to the Congress and advocacy with VA seeking a fair and equitable solution to the inconsistency and inequality of these policies. This issue has 

also caught the attention of National Governors Association which has issued statements in support of full cost of care reimbursement for State Homes each year since 

2002. 

In some jurisdictions, VA case managers routinely send veterans to contract 

homes because the full cost of care is absorbed by VA which prevents veterans from 

having to meet the stringent financial requirements of Title 19 Medicaid. Hundreds, 


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probably thousands, of veterans meeting the criteria originally set forth in the 1999 

Millennium Act, did not receive this relief, or the benefits Congress intended. During this time lapse, veterans who served this nation honorably and incurred severe 

disabilities, injuries and illnesses have lost assets, personal savings and pride in 

order to meet the costs of care levied on them. Additionally State Directors have 

struggled to meet their fiduciary responsibilities and maintain the quality of care 

these veterans earned and deserve, 

With the enactment of the 2006 ‘‘Veterans Benefits, Health Care, and Information 

Technology Act of 2006’’ (Pub. L. No. 109–461, § 211(a), codified at 38 U.S.C. 

§ 1745(a)), Congress approved payments by the VA to State Veterans Homes which 

meet the rigorous requirements required to qualify for per diem reimbursement and 

authorized VA to place severely disabled service-connected veterans directly in State 

homes and stipulated that VA was required to reimburse State homes for the full 

cost of such care.’’ NASDVA as well as many veterans and the National Governors 

Association believed that the situation had been resolved. 

The notice of ‘‘Regulations’’ required for the implementation of this legislation languished for years. Despite the need and the urgency for these rules, Congress, providers and veterans had to wait while the cost of care continued to increase. All parties expected the statute to take effect 90 days after its enactment (March 21, 2007); 

but VA did not issue regulations to implement the program until April 29, 2009 (effective May 29, 2009). This 21⁄2-year delay in issuing regulations to implement the 

new per diem program has caused enormous difficulties and hardships not only with 

recordkeeping and administrative problems, veterans and their families did not receive the financial relief they were promised. 

Even as these Regulations finally became public in November of 2008, VA restricted the ‘‘comment period’’ to only 30 days instead of the usual 60 days. On first 

read of the proposed Regulations, it was clear that the spirit and intent of this process was a casualty of time and bureaucracy. How ironic that Congressional legislation to update the basic per diem rates for veterans in State Homes was enacted 

in 2006, consumed over 2 years of VA time to develop and publish the Regulations 

and resulted in only 30 days over the Christmas Holiday for comment. Despite the 

economic realities of the times, VA presented a very convoluted, confusing and disappointing proposal for the implementation of this landmark legislation. 

The program did not provide State Veterans Homes with the actual cost of care 

for disabled veterans, despite the intent of Congress. In fact in many States that 

had Medicare and/or Medicaid-certified Veterans Homes, the stipulation that any 

funding from these sources had to be repaid after 2 years was pejorative and naı ̈ve 

on VA’s part. How do you return the lost assets, homes, cars and savings to veterans who did spend down to qualify for Medicaid? How do you ‘‘regulate’’ and disqualify the use of Medicare to veterans who had contributed to that fund throughout 

their lifetime? How do you square these new policies for veterans who died waiting 

for these benefits. 

NASDVA worked for and expected that the new ‘‘per diem’’ rate for veterans, who 

meet the mandatory eligibility, would be equal to the same rate paid to VA Contracted Nursing Homes. The Regulations that went into effect in 2009 failed to adequately reimburse State Homes and State governments for the level of care required 

by VA. More importantly unintended consequences of the present reimbursement 

rates threatens the continued financial viability of many State Veterans Homes systems and raises questions about the future viability of the entire State Nursing 

Home Program, The specifications and the limitations required by the present Regulations are not in keeping with the original intent of Congress. 

2009 GAO Report on VA Long-Term Care 

Information published in the 2009 GAO Report ‘‘VA HEALTH CARE Long-Term 

Care Strategic Planning and Budgeting Need Improvement’’ identified a considerable difference in estimates of long term care demands and gaps in service with VA 

budget estimates and strategic planning. GAO found that VA’s estimates were based 

on cost assumptions and workload projections that appeared to be low and unrealistic for both nursing home and non-institutional care. VA’s model was flawed and 

underestimated its own nursing home spending because the projected increase in 

cost was estimated at 2.5 percent which is considerably lower than market costs. 

GAO reported that VA had plans to increase workload for certain veterans for who 

they are required to provide care but did not include nursing home workload plans 

for most veterans already on VA roles. 

GAO found that VA used cost assumptions which seriously underestimated the actual cost of care, minimized workload estimates and miscalculated the number of 

veterans using this system. Not only did this cast a great deal of doubt on the ‘‘StraVerDate Nov 24 2008 07:21 Aug 25, 2010 Jkt 055233 PO 00000 Frm 00050 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\55233.XXX GPO1 PsN: 55233

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tegic Plan’’, these major discrepancies also raised questions about the reliability of 

VA’s spending estimates and the extent to which VA was actually closing the gaps 

in the long-term system of care for America’s veterans. These findings strongly suggest that present problems in VA reimbursement policies may be linked to the 

faulty budget projections and unrealistic data used in the development of the Strategic Plan reviewed by GAO. 

NASDVA has and continues to support changes to the present program that 

would insure that: 

• VA develop a strategic plan for long-term care services that maximizes the 

role of State veterans homes in providing care and minimizes VA cost of Long 

Term Care for our Nation’s Veterans. • VA provides veterans in State Nursing Homes meeting the mandatory eligibility requirements the same ‘‘per diem rates’’ paid to VA or community contracted nursing homes. • Congress authorize sufficient funding to keep the existing backlog of projects 

in the State Extended Care Facilities Construction Grant Program at a manageable level to assure life safety upgrades and new construction are timely. • A implement measures to assure that States are paid a more equitable per 

diem rate representing the 50 percent of the States’ average costs, as allowed 

by law, and that the policies governing the program be amended to allow new 

State veterans homes up to 50 percent of the total cost of care paid retroactively from the date of the first veteran’s admission to the new home. 

Conclusion 

States are the second largest providers of service to veterans in the America and commit over $4 billion dollars annually to provide direct services and support to veterans and their families. We augment and enhance VA programs and initiatives at 

the local level. We provide vital services and support to veterans and their families 

through State Benefit Offices, Cemetery and Memorial Affairs, Domiciles, Homeless 

programs, Substance Abuse and Skilled Nursing care. As of the beginning of this 

fiscal year 2009, there were nearly 28,000 State Veteran Nursing Home beds, more 

than 6,000 veterans domiciliary beds in 135 State veterans’ facilities throughout the 

Nation. In fact, States provide the majority of VA Authorized long-term and nursing 

home care. In essence we are ‘‘where the rubber meets the road.’’ More importantly 

we are accountable to our Governors and the citizens of our State for the quality 

and responsiveness of our activities. Partnerships with States Departments of Veterans Affairs and State Veterans Homes are both cost-efficient and effective in utilization of resources and the creation of a quality continuum of care for all of America’s Veterans. We must all work together in real partnership to assure veterans 

now and in the future receive the services and programs the need and deserve. 

f 

Statement of Paralyzed Veterans of America 

Chairman Michaud, Ranking Member Brown, and members of the Subcommittee, 

Paralyzed Veterans of America (PVA) would like to thank you for the opportunity 

to submit our views on H.R. 4241, to allow for increased flexibility in payments for 

State veterans homes. This subject is covered in depth in the recently released 

version of The Independent Budget regarding the funding requirements for the VA 

health care system for FY 2011. 

PVA generally supports H.R. 4241 to allow for increased flexibility in payments 

for State veterans homes, but believes greater understanding of the problem is needed. 

The Department of Veterans Affairs (VA) State Veterans Home Program currently 

encompasses 137 nursing homes in 50 States and Puerto Rico, with more than 

28,000 nursing home and domiciliary beds for veterans and their dependents. State 

veterans homes provide the bulk of institutional long-term care to the nation’s veterans. The GAO has reported that State homes provide 52 percent of VA’s overall 

patient workload in nursing homes, while consuming just 12 percent of VA’s longterm care budget. VA’s authorized ADC for State veterans homes was 19,208 for FY 

2008. 

VA holds State homes to the same standards applied to the nursing home care 

units it operates. State homes are inspected annually by teams of VA examiners, 

and VA’s Office of Inspector General (OIG) also audits and inspects them when determined necessary. State homes that are authorized to receive Medicaid and Medicare payments also are subject to unannounced inspections by the CMS and anVerDate Nov 24 2008 07:21 Aug 25, 2010 Jkt 055233 PO 00000 Frm 00051 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\55233.XXX GPO1 PsN: 55233

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nounced and unannounced inspections by the OIG of the Department of Health and 

Human Services. 

VA pays a small per diem for each veteran residing in a State home, currently at a rate of $77.53 per day. This is less than one-third of the average cost of that 

veteran’s care. The remaining two-thirds is made up of a mix of funding, including 

State support, Medicaid, Medicare, and other public and private sources. In contrast, VA pays Community Nursing Homes over $200 per day with the cost of care 

in VA Community Living Centers (VACLC) at almost $800 per day. 

Service-connected veterans should be the top priority for admission to State veterans homes, but traditionally they have not considered State homes an option for 

nursing home services because of lack of VA financial support. To remedy this disincentive, Congress provided authority for full VA payment. 

Unfortunately, veterans with severe disabilities may be put at a disadvantage in 

gaining access to State veterans homes. As part of P.L. 109–461, the ‘‘Veterans Benefits, Health Care, and Information Technology Act of 2006,’’ Congress approved 

payment of different per diem amounts by VA to State veterans homes which provide nursing home care to veterans with service-connected disabilities, a program 

dubbed ‘‘the 70-Percent Program.’’ VA issued regulations for this program in April 

2009 and granted a higher per diem rate for veterans with service-connected disabilities. Unfortunately, PVA is hearing reports that these rates have resulted in lower 

payments to many State veterans homes and in some cases are less than the actual 

cost of care. 

PVA believes VA made a good faith effort in establishing the original rates, but 

may not have taken into consideration the significantly greater cost of care for those 

with severe disabilities, in particular those service connected veterans with 70 percent or greater ratings. As a result, we are concerned that many severely disabled 

veterans who would choose to use the State veterans homes will be denied access 

simply because the veterans home can not afford the cost of their care. This will 

cause a significant impact on our veterans most in need at a time when VA is continuing to reduce their capacity to provide long-term care facilities. 

PVA has been informed by representatives of the National Association of State 

Veterans Homes (NASVH) that VA seems resistant to modifications of the per diem 

rate or alternatives that may provide greater reimbursement rates. There is a sense 

that the VA believes the lower rate is appropriate because VA shoulders a great financial burden when it helps cover the cost of construction, rehabilitation, and repair of State veterans homes, providing up to 65 percent of the cost, with the State 

providing at least 35 percent. If true, PVA believes this argument is invalid. In FY 2007 the construction grant program was funded at only $85 million, the 

same amount Congress had provided in FY 2006. Based on a current backlog of 

nearly $1 billion in grant proposals, and with thousands of veterans on waiting lists 

for State beds, The Independent Budget for FY 2008 recommended no less than $150 

million for this program and Congress responded with $165 million for FY 2008 in 

the Omnibus Appropriations Act. For FY 2009, the IB recommended $200 million 

for the State veterans home construction grant program, and Congress provided 

$175 million. Also in FY 2009 Congress provided State home construction $100 million in the Stimulus Act, giving VA a total of $265 million in availability for its construction grant program. For FY 2011, The Independent Budget recommends the 

construction grant program be funded at $275 million. 

The VA is using this grant program as an incentive to build more capacity to 

avoid the greater cost of building it themselves. PVA firmly believes that construction costs should not be mixed with health care costs. The per diem rate should be 

independent of any quid pro quo VA may believe exists with the State veterans 

homes due to construction funding. State veterans homes can provide high quality 

care at a rate cheaper than VA and should be rewarded for doing so, not punished. 

Mr. Chairman, PVA believes H.R. 4241 may help remedy this problem. But we 

believe the Subcommittee should go further. Currently there is only anecdotal information on perceived widespread, but individual, challenges facing State veterans 

homes due to this problem. With the challenges facing future VA budgets, abstract 

information is insufficient to make the critical decisions needed to support our veterans. PVA would recommend a study to determine what impact these funding 

shortfalls are having on State veterans homes. Also, due to the immediate impact 

of these financial shortfalls, we believe this report should be completed as soon as 

possible, but no later than September 30, 2010. As the report is being conducted, 

one option might be for VA to raise their reimbursement rate to State veterans 

homes to be commensurate with the rate paid to Community Nursing Homes for 

similar services for 70 percent and greater service-connected disabled veterans. 

VA and Congress must continue to provide the construction grant and per diem 

funding necessary to support State veterans homes. Even though Congress has apVerDate Nov 24 2008 07:21 Aug 25, 2010 Jkt 055233 PO 00000 Frm 00052 Fmt 6604 Sfmt 6621 I:\WAYS\OUT\55233.XXX GPO1 PsN: 55233

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proved full long-term care funding for certain service connected veterans in State 

veterans homes, under P.L. 109–461 it must continue to provide resources to support other veteran residents in these facilities and to maintain the infrastructure. 

To that end, Congress should provide State veterans homes $275 million in construction grant funds for FY 2011. 

PVA would like to thank this Subcommittee for the opportunity to express our 

views relating to these important benefits for veterans. We look forward to working 

with this committee as they continue addressing the issues that effect America’s 

veterans. 

f 

Veterans of Foreign Wars of the United States 

Washington, DC. 

February 18, 2010 

The Honorable Michael Michaud 

United States House of Representatives 

1724 Longworth House Office Building 

Washington, DC 20515 

Dear Representative Michaud, 

On behalf of the 2.1 million members of the Veterans of Foreign Wars and our 

Auxiliaries, I would like to thank you for the invitation to testify on legislation H.R. 

4241, to allow for increased flexibility in payments for State veterans homes. The 

VFW supports H.R. 4241, to correct the inadequate financing of long-term care for 

the most disabled veterans in State Veterans Homes. 

This bill seeks to correct the inadequate funding for the long-term care in a SVH 

for veterans rated at 70 percent or above for service connected disabilities. With the 

passage of PL 109–461, SVH’s were afforded a higher per diem rate of reimbursement from the Department of Veterans Affairs. VA’s regulations, issued April 29, 

2009, indicate all medication and specific outpatient medical care for service-connected injuries to be provided by SVH’s. Further, it bars SVH’s from billing to Medicare and Medicaid for any and all additional costs that exceed the per diem rate. 

The current law and VA regulations create a disincentive for SVH’s across the nation to care for the most severely disabled veterans. Several states indicate the potential loss of millions of dollars complying with VA regulations; others have limited 

or stopped accepting these veterans into their homes. 

Your legislation grants the VA Secretary the authority to enter into a state-bystate per diem arrangement with SVH’s. Each state’s rate would be comparable to 

the geographic area and the reimbursement rate available to a ‘non-department 

nursing home’ or a private nursing home facility. Thus, correcting the existing 

health care funding shortfall for America’s most disabled veterans. 

The VFW is pleased to support your legislation for America’s veterans. 

Sincerely, 

Robert E. Wallace 

Executive Director 


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MATERIAL SUBMITTED FOR THE RECORD 

Committee on Veterans’ Affairs 

Subcommittee on Health 

Washington, DC. 

March 9, 2010 

Honorable Eric K. Shinseki 

Secretary 

U.S. Department of Veterans Affairs 

810 Vermont Avenue, NW 

Washington, DC 20240 

Dear Secretary Shinseki: 

Thank you for the testimony of Dr. James F. Burris, Chief Consultant for Geriatrics and Extended Care with the Veterans Health Administration, at the U.S. 

House of Representatives Committee on Veterans’ Affairs Subcommittee on Health 

legislative hearing on H.R. 4241 that took place on March 3, 2010. 

Please provide answers to the following questions by April 20, 2010, to Jeff 

Burdette, Legislative Assistant to the Subcommittee on Health. 

1. Prior to the passage of P.L. 109–461, could State Veterans Homes bill the 

Department of Veterans Affairs (VA) and Center for Medicare and Medicaid 

Services (CMS) for the same care provided? If so, for what specific services 

are State Veterans Homes billing both VA and CMS 

2. It is our understanding that VA has been meeting with some State Veterans Homes to explore non-legislative solutions to this problem. Please explain the nature of these discussions and the options that you have explored 

together. What is prohibiting VA from moving forward with a non-legislative solution? 

3. VA opposes H.R. 4241 even though Medicaid and Medicare certified State 

Veterans Homes have presented initial data showing the negative financial 

implications of the new per diem rate. Given the urgency of this issue, what 

solution can VA offer since it opposes H.R. 4241? 

4. It appears that one of the key reasons that the new per diem payments do 

not work for Medicaid and Medicare certified State Veterans Homes is that 

the new payments do not account for outlier service costs such as dialysis, 

x-rays, and labs. What are the pros and cons of mandating VA to include 

outlier costs in the development of new per diem rates so that the State 

Veterans Homes would not have to bill Medicare and Medicaid? 

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

like? 

6. Would a reimbursement schedule that bases payments on the actual acuity 

of each patient, such as that used by VA in its Resource Utilization Group 

(RUG) scores for community nursing homes, be an effective mechanism for 

properly and accurately reimbursing State Veterans Homes for 70-percent 

veterans? Could VA implement such a system for ‘‘mandatory veterans’’ 

under the current law? If yes, how quickly could such a system be put into 

place? 

7. Your testimony states that H.R. 4241 will increase VA costs by $17.5 million next year and $200 million over 10 years. Please describe in detail how 

you arrived at this cost estimate. Does this indicate that the current payment system is underpaying State Veterans Homes under the 70-Percent 

Program? In your view, does the current payment system compromise the 

quality of nursing care being provided to veterans under the 70-Percent 

Program? If not, please explain. 

8. H.R. 4241 would authorize VA to enter into agreements with State Homes 

to provide care for the ‘‘70-Percent Program’’ under VA’s contract nursing 

home care authority. What challenges would this construct create for VA? 

9. Might it help alleviate the current situation if State homes were able to 

simply opt out of the 70-Percent Program if they felt they would be better 

off without it? 

10. In your testimony, you stated that ‘‘although a number of States are satisfied with the new rates VA pays for mandatory Veterans, several have reported problems.’’ Please provide a list of those states homes that are satisfied and those state homes that have reported issues. 

11. What is VA’s long-term strategy to improve the care provided to women veterans and how does the fiscal year 2011 budget request for women veterans 

fit into this long term strategy? 


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12. The Paralyzed Veterans of America (PVA) provided a statement for the 

record. The statement suggests that before rushing to a legislative solution, 

a study be conducted ASAP to determine the immediate impact of the reported financial shortfalls. Would you support this proposal? 

13. Have you received responses from any states regarding your request for 

‘‘documentation that demonstrates how their actual costs for . . . care . . . exceeds the allowable VA per diem payment?’’ If so, please share those responses. 

14. Are there any mechanisms in place to assess the accuracy of the actual cost 

of care reported by state homes? If so, please provide details. 

15. What information, if any, are you lacking to gain a complete understanding 

of how State homes are currently being impacted by P.L. 109–461? 

In addition, please answer the following question for Congresswoman Madeleine 

Bordallo: 

Over the past 18 months, I have requested that VA address the issue of eligibility for Guam to participate in the VA State Home Grant program. On July 

10, 2009, VA published a proposed rule in the Federal Register that would include Guam and the other insular areas in the VA State Home Grant program. 

As of November 2009, VA anticipated publishing the final rule by the end of 

the year. I certainly appreciate the efforts of VA to correct this oversight. However, please update me on the status of this final rule and when we can reasonably expect VA to publish the amended final rule that would include Guam in 

the VA State Home Grant program. 

Thank you again for taking the time to answer these questions. The Committee 

looks forward to receiving your answers by April 20, 2010. 

Sincerely, 

MICHAEL H. MICHAUD HENRY E. BROWN, JR. 

Chairman Ranking Member 

Questions for the Record 

The Honorable Michael Michaud, Chairman 

The Honorable Henry Brown Jr., Ranking Member 

Subcommittee on Health 

House Veterans Affairs Committee 

Legislative Hearing on H.R. 4241 

March 3, 2010 

Question 1: Prior to the passage of Public Law 109–461, could State Veterans 

Homes bill the Department of Veterans Affairs (VA) and Center for Medicare and 

Medicaid Services (CMS) for the same care provided? If so, for what specific services 

are State Veterans Homes billing both VA and CMS? 

Response: Yes, prior to the passage of Public Law 109–461, State Homes could 

bill both the Department of Veterans Affairs (VA) and the Centers for Medicare and 

Medicaid Services (CMS) for the same care. Under an amendment to 38 USC 1741 

made by Public Law 108–422, payments made by VA under this section cannot be 

used to offset or reduce any other payment made to assist Veterans. According to 

CMS, when State Veterans Homes charge their residents and patients to the extent 

of their ability to pay, or seek payment from available sources other than Medicare, 

Medicare benefits are payable for covered items and services furnished to Medicare 

beneficiaries. However, the State Home must charge the Medicare copayment in 

order to receive Medicare payments. (See Medicare Benefit Policy Manual, 100–02, 

Chapter 16, § 50.3.3 for details) VA does not have any information about the services for which the State Veterans Homes are billing CMS. 

Question 2: It is our understanding that VA has been meeting with some State 

Veterans Homes to explore non-legislative solutions to this problem. Please explain 

the nature of these discussions and the options that you have explored together. 

What is prohibiting VA from moving forward with a non-legislative solution? 

Response: VA has met on several occasions, and continues to meet with designated representatives of the National Association of State Veterans Homes and 

with the Executive Committee of the National Association of State Directors of Veterans Affairs. We have discussed the concerns of the State Homes and the limitations placed on VA by the current law. VA has explored options for modifying the 


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method of determining the State Homes’ cost of care and clarifying those services 

they can bill other payors. VA has done the following: 

• Sent a memorandum to VA field facilities in October 2009, clarifying that 

they are to continue providing specialty services to Veterans residing in State 

Homes; • Met with the Office of Management and Budget (OMB) to seek assistance in 

clarifying the cost accounting rules of OMB Circular A–87 for the States; • Offered to assist individual State Homes in correctly determining their costs 

of care in accordance with OMB Circular A–87. 

Addressing these issues will require detailed actual cost data as well as other information from State Veterans Homes, which VA requested on March 29, 2010, and 

received, in part, just this week. VA continues to pursue additional data from the 

States. 

Question 3: VA opposes H.R. 4241 even though Medicaid and Medicare certified 

State Veterans Homes have presented initial data showing the negative financial 

implications of the new per diem rate. Given the urgency of this issue, what solution 

can VA offer since it opposes H.R. 4241? 

Response: VA believes that non-legislative approaches such as those described 

above will mitigate the problems experienced by the states and that legislation is 

not necessary at this time. VA has asked the State Homes to provide additional cost 

of care data so that we can better understand the financial implications and challenges they face. VA has already taken the actions noted above in its response to 

Question 2. Without the data from the States, VA has not been able to sufficiently 

clarify the scope of the problems being experienced by the State Homes. We continue to seek their cooperation. 

Question 4: It appears that one of the key reasons that the new per diem payments do not work for Medicaid and Medicare certified State Veterans Homes is 

that the new payments do not account for outlier service costs such as dialysis, xrays, and labs. What are the pros and cons of mandating VA to include outlier costs 

in the development of new per diem rates so that the State Homes would not have 

to bill Medicare and Medicaid? 

Response: Public Law (PL) 109–461 specifies that VA is to pay a per diem payment for nursing home care. Nursing home care services are identified in VA regulations and do not include dialysis, x-rays, or other specialized services. Paying 

those costs would make the State Homes much more expensive for VA to support. 

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

it look like? 

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

Question 6: Would a reimbursement schedule that bases payments on the actual 

acuity of each patient, such as that used by VA in its Resource Utilization Group 

(RUG) scores for community nursing homes, be an effective mechanism for properly 

and accurately reimbursing State Veterans Homes for 70 percent veterans? Could 

VA implement such a system for ‘‘mandatory Veterans’’ under the current law? If 

yes, how quickly could such a system be put into place? 

Response: VA would need to revise its regulation to implement such a system. 

While such system may be an effective mechanism for reimbursing State Veterans 

Homes for mandatory Veterans there are some limiting factors. For example, only 

approximately 60 percent of State Homes presently report RUG scores to VA; therefore, implementing such a system would require all State Homes to develop the capability to determine and report RUG scores. In addition, under current law VA is 

required to pay the lesser of the prevailing rate (i.e., the rate determined by the 

RUG score) or actual costs, so there is no assurance the State would receive the prevailing rate. 

Question 7: Your testimony states that H.R. 4241 will increase VA cost by $17.5 

million next year and $200 million over 10 years. Please describe in detail how you 

arrived at this cost estimate. Does this indicate that the current payment system 

is underpaying State Veterans Homes under the 70-Percent Program? In your view, 

does the current payment system compromise the quality of nursing care being provided to Veterans under the 70-Percent Program? If not, please explain. 

Response: The State Home representatives have told VA that most states are receiving the actual cost rather than the prevailing per diem rate because the actual 

cost is less in most cases. To determine the cost estimate, VA multiplied the average 


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daily census of Veterans residing in State Homes by the average cost of care, and 

subtracted that total from the total obtained by multiplying the average daily census by the average prevailing rate. The figure of $17.5 million therefore, reflects the 

additional amount VA would pay if the ‘‘lesser of’’ language were stricken from the 

law. The $200 million figure was obtained by adjusting the $17.5 million figure for 

inflation, and the anticipated growth in the average daily census over 10 years. The 

method of determining actual cost under OMB Circular A–87 is a standard method 

for grants to State, local, and Tribal governments. We are unable to determine 

whether the current payment system is underpaying State Veterans Homes under 

the 70-Percent Program because the States have not provided comprehensive data 

on their actual costs. We have not seen any evidence from our annual inspections 

of State Veterans Homes that the quality of nursing care being provided to Veterans 

has been compromised. 

Question 8: H.R. 4241 would authorize VA to enter into agreements with State 

Homes to provide care for the ‘‘70-Percent Program’’ under VA’s contract nursing 

home care authority. What challenges would this construct create for VA? 

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

VA and State Veterans Homes. 

Question 9: Might it help alleviate the current situation if State Homes were 

able to simply opt out of the 70-Percent Program if they felt they would be better 

off without it? 

Response: State Homes are at liberty to opt out of the 70-Percent Program under 

current law and bill other payors. However, VA cannot pay the basic per diem rate 

for a mandatory Veteran. The state agency responsible for the State Homes must 

opt out and not receive a VA per diem payment, or opt in and accept the higher 

VA per diem as the full cost of nursing home care. 

Question 10: In your testimony, you stated that ‘‘although a number of States 

are satisfied with the new rates VA pays for mandatory Veterans, several have reported problems.’’ Please provide a list of those State Homes that are satisfied and 

those State Homes that have reported issues. 

Response: VA does not have a comprehensive listing of each state’s level of satisfaction with the new rates VA pays for mandatory Veterans. This is because only 

a few states have chosen to provide input to VA on this issue. Anecdotally, Maine, 

New Hampshire, New York, California, Nevada and Louisiana have specifically indicated they are dissatisfied. New York and Nebraska have said they would be satisfied if they could bill CMS for outlier costs. Missouri, Oklahoma, and Texas have 

reported they are satisfied with the new rates. The National Association of State 

Veterans Homes has reported that ‘‘many’’ states are dissatisfied with the new 

rates, but has not provided the number or the names of dissatisfied states. Fortytwo states have applied to receive the new rates. 

Question 11: What is the long-term strategy to improve the care provided to 

women Veterans and how does the fiscal year (FY) 2011 budget request for women 

Veterans fit into this long term strategy? 

Response: VA has continued long term strategic plans to enhance the provision 

of health services to women Veterans. The following elements are outlined as they 

relate to the FY 2011 Budget request: 

Fully Implement Comprehensive Primary Care for Women Veterans 

• Staffing: Providers proficient in women’s health • Staffing: Support staff for care coordination within medical home care model 

in women’s health • Facility Resources: Construction enhancements focusing on dignity, privacy, 

safety • Equipment, Supplies: Necessary clinical enhancements to deliver primary 

care • Training: Retrain providers to care for women Veterans • Communication: Effective internal and external communication about women 

Veterans 

Beginning with FY 2010, the New Model of Care Initiative supports the addition 

of primary care support staff, training, and some space configuration for women’s 

health. In the FY 2011 Budget request, general medical services dollars will continue to support the overall medical care provision for women Veterans. In addition, 


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the FY2011 Budget line item request for women Veterans specifically increases the 

amount needed for gender-specific care such as cervical and breast cancer 

screenings. 

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

The strategic goal is to fully integrate specialty care services for women Veterans 

at the facility level. In FY 2011, the requested budget will support Comprehensive 

Care Services for women Veterans that includes: 

• Mental Health 

• Specialty Care 

• Emergency Care 

• Diagnostic Services 

• Tele-Health 

• Geriatric and extended care services 

• Women’s health and wellness screening and prevention programs 

• Rehabilitation health (catastrophically injured women) 

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

Question 12: The Paralyzed Veterans of America (PVA) provided a statement for 

the record. The statement suggests that before rushing to a legislative solution, a 

study be conducted ASAP to determine the immediate impact of the reported financial shortfalls. Would you support this proposal? 

Response: VA concurs that a study to determine the immediate impact of the reported financial shortfalls and the underlying reasons for the shortfalls would help 

VA and Congress to better understand the financial challenges faced by the state 

homes and to develop responses to mitigate those challenges. VA has asked the 

state homes to provide additional cost of care data, but recently received some data 

from more states. If Congress were to mandate that VA carry out such a study, VA 

would request that Congress also mandate that the States provide the data necessary for VA to conduct the study. 

Question 13: Have you received response from any states regarding your request 

for ‘‘documentation that demonstrates how their actual costs for . . . care . . . exceeds 

the allowable VA per diem payment?’’ If so, please share those responses. 

Response: VA has received responses from Maine, Idaho, and Hawaii. (See attachments 1, 2, and 3) 

VA recently received data from 10 states, including additional data from Maine 

and Idaho, and is in the process of evaluating it. 

Question 14: Are there any mechanisms in place to assess the accuracy of the 

actual cost of care reported by state homes? If so, please provide details. 

Response: VA has not previously had a mechanism in place to review cost-reporting by the states at the level of detail required to address the challenges posed by 

the new per diem payment mechanism. Collaboration between the program and fiscal offices will be necessary to review the data now being reported by the states to 

VA. 

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

Response: VA has requested that the states provide Medicaid cost reports for 

those homes that are certified by the Centers for Medicare and Medicaid Services 

(CMS). Medicare cost reports may also be made available directly through the CMS. 

This will provide standardized and audited data on the states’ actual costs that can 

be compared with the new rates paid by VA to the State Homes under P.L. 109– 

461. More than 60 of the State Homes are CMS certified, but VA has received Medicaid cost reports from only 10 states which have a total of 30 State Homes. VA is 

seeking additional information from the states and is also exploring obtaining information directly from CMS. 

The Honorable Congresswoman Madeleine Bordallo 

Question 1: Over the past 18 months, I have requested that VA address the issue 

of eligibility for Guam to participate in the VA State Home Grant program. On July 

10, 2009, VA published a proposed rule in the Federal Register that would include 


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Guam and the other insular areas in the VA State Home Grant program. As of November 2009, VA anticipated publishing the final rule by the end of the year. I certainly appreciate the efforts of VA to correct this oversight. However, please update 

me on the status of this final rule and when we can reasonably expect VA to publish 

the amended final rule that would include Guam in the VA State Home Grant program. 

Response: VA anticipates that the final rule will be published within 30 days 

after it completes concurrence. 

Attachment 1—Response from Maine 

OMB A–87 Cost Report 

• The OMB A–87 rate will almost always be less than the VA Published Rate. 

• This is so because OMB Circular A–87 disallows certain costs that otherwise 

would be payable to a SVH. 

• This means that almost all Medicare/Medicaid certified Homes will be paid 

less than the published VA Rates for the Program. 

• The difference between the VA Published Rate and the OMB A–87 Rate may 

be substantial. 

Augusta SVH OMB A–87 Report, FY ‘08 

1. Total Allowable Costs $9,141,698 

2. Total Income from Other Sources $(5,805,822) 

3. Total Allowable Costs Less Income from Other Sources $3,335,876 

4. 1/2 Total Allowable Costs $4,570,849 

5. Total Claimed by Home from VA $2,228,789 

Detail For Augusta SVH FY ’08 OMB A–87 Report 

Total Costs $9,424,641 

Less Disallowed Costs: 

Employee Meals & Lodging $2,649 

Donated Services $9,790 

Bad Debts $40,220 

Disallowed Advertising $5,927 

Disallowed Depreciation * $221,372 

Other $2,985 

Total Disallowed Costs $(282,943) 

Total Allowable Costs $9,141,698 ** 

*65% of depreciation expense on items purchased with a VA grant 

**$9,141,698÷42,327 (total actual resident days) = $215.98 

Cost Report Settlement under the Program 

VA Published Rate for 2008 $267.81 

MVH OMB A–87 Rate $215.98 

Difference $51.83 

Both are below the actual daily cost of care. 

OMB Disallowed Costs (Maine) 

• Disallowed Costs for MVH Augusta $282,943 

• Disallowed Costs for MVH Scarborough $328,027 

• Disallowed Costs for MVH South Paris $117,341 

• Disallowed Costs for MVH Bangor $252,752 

• Disallowed Costs for MVH Caribou $80,186 

OMB FY ’08 TOTAL DISALLOWED COSTS: $1,061,249 

The Problem Is Worse Than You Think 

• For Medicare/Medicaid Certified Homes, both the VA Published Rate and the 

OMB A–87 Rate are likely to be less than a Home’s actual cost of care. 

• This is so because many services (such as physicians, x-rays, and labs) are 

currently paid by Medicare Parts B and D rather than State Veterans Homes. 

• VA payments under the Program, however, are ‘‘payment in full to the State 

Homes,’’ and the VA appears to prohibit billing by State Homes to Medicare 

Parts B and D for veterans covered by the Program. 


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• Therefore, State Homes must provide drugs, physicians, and other services 

under the Program at their own cost. • Such costs can be thousands of dollars, per resident, per month, and such 

‘‘Outlier Costs’’ Are Not Paid under the Program outside of the lesser of the 

VA Published Rates (which almost nobody will be paid) or the OMB A–87 

Rates (which are below actual costs of care). 

Examples of Outlier Costs That Are Not 

Paid Separately by the VA 

Dialysis supplies and services $1,200 

PET, CT Scans, MRI $4,000 

Chemotherapy $1,800 

Radiation Therapy $2,000 

Customized Prosthetics and Orthotics $500 

Emergency Room Treatment $500 

Drugs Up to $3,000/month 

Attachment 2—Response from Idaho 

Idaho Division of Veterans Services Boise Veterans Home 

Statement of Expenditures For the Month Ending: 

September-09 

NURSING 

CARE 

DOMICILIARY 

CARE 

TOTAL 

COST 

FISCAL 15,243.59 907.11 16,150.70 

SECURITY 18,927.01 3,399.52 22,326.53 

FOOD SERVICE 91,408.09 23,535.76 114,943.85 

UTILITIES 29,290.11 5,260.85 34,550.96 

LAUNDRY 4,422.91 276.14 4,699.05 

VOLUNTEERS 6,797.65 1,750.31 8,548.16 

RELIGIOUS SERVICES 1,434.28 369.30 1,803.58 

SOCIAL SERVICE 18,652.27 1,109.95 19,762.22 

HOUSEKEEPING 43,368.04 7,789.42 51,157.46 

MED RECORDS 15,014.56 893.48 15,908.04 

PHYSICAL THERAPY 57,637.86 0.00 57,637.86 

ACTIVITIES 17,704.45 1,053.55 18,758.00 

PHARMACY 43,242.21 0.00 43,242.21 

ADMINISTRATION 47,461.42 2,824.31 50,285.73 

DIRECT CARE COSTS 371,858.40 22,128.33 393,986.73 

DIVISION CENTRAL OFFICE COSTS 28,796.56 1,713.61 30,510.17 

OVA CENTRAL COST ALLOCATION 3,011.80 179.22 3,191.03 

LESS CAPITAL OUTLAY (7,877.20) (2,028.22) (9,905.42) 

DEPRECIATION 10,031.22 2,756.67 12,767.69 

TOTAL COSTS $816,425.45 $73,919.29 $890,344.75 

ELIGIBLE DAYS CARE 3,613 938 

PER DIEM COST 224.111 78.81 

ELIGIBLE DAYS CARE 3,613.00 938.00 

LESS: 70% or HIGHER 

DAYS CARE 351.00 0.00 

TOTAL ELIGIBLE DAYS 

CARE 3,262.00 938.00 

PER DIEM @ 74.42 $242,758.04 

PER DIEM @ 34.40 $32.267.20 

TOTAL PER DIEM $275,025.24 

70% HIGHER DAYS CARE 224.11 $78,662.61 

TOTAL PER DIEM + 70% 

or HIGHER DAYS CARE $353,687.85 

Attachment 3—Response from Hawaii 

The 70 Percent Disabled Veterans Program, Public Law 109–461 

The 70 percent Disabled Veterans Program http://www.vagov/ogc/docs/PLl09- 

461.pdf has become a controversial program. Initially, the Law looked good because 


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it allowed state veterans homes (SVH) the option of providing long-term nursing 

care services, at no cost, to 70 percent and more disabled veterans. However, upon 

closer examination we learned the law could cause some States to close their doors 

because of the additional financial burden placed on them. Under this law, SVH 

have no choice in the level or source of payment; if the veteran qualifies for the Program, the Home must accept the new VA paid per diem—period. The Program has 

an enhanced per diem rate ($331.35 v $74.42/day for Hawaii) which is enticing, but 

these higher rates generally result in lower total amounts received for care provided. 

The provision originated in legislation introduced by Senator Daniel Akaka CD– 

HI), who described the measure as an effort to ‘‘protect and expand’’ the State 

Homes program. ‘‘We need to fortify the program,’’ said Senator Akaka, who described the language that became section 211(a) as intended to ‘‘authorize VA to 

place severely disabled service-connected veterans directly in State homes and . . . 

require VA to reimburse State homes for the cost of such care.’’ 

Under Public Law 109–461, Title II, Sec 211 § 1745a(3) the VA higher Per Diem 

rate is considered full payment for care. Further, if the VA pays the higher per diem 

rate, and accepts retroactively money for services delivered; the SVH must return 

moneys to all payers for the period the VA retroactively paid. Additionally, the VA 

appears to prohibit billing by State Homes to Medicare Parts B and D for veterans 

covered by the Program. Payments to SVH under the Program are the lesser of a 

rate published by VA by the VA for that Veterans Home, or the daily cost of care 

for that Veterans Home determined under OMB Circular A–87. This circular disallows certain costs that otherwise would be payable to a SVH, i.e., employee meals 

and lodging, donated services, bad debts, advertising, certain depreciation, etc. To 

our knowledge, every State Home in the Nation has an OMB Circular A–87 rate 

which is less than the VA ‘‘published’’ rate. It is as likely as not that SVH costs 

will rise sharply because state homes must provide and pay for equipment and services currently paid by Medicare Parts B and D. 

Yukio Okutsu State Veterans Home has experience with four veterans eligible for 

the Program, three enhanced Per Diem eligible veterans in residence—two are relatively low maintenance, the third was in residence for 13 days; Per Diem reimbursement for his stay was $4,307.55 his ancillary medical bills totaled $8,383.44. 

Beginning net loss of $7 per day room and board then adding costs for Ancillary 

Services; Physician Services, Laboratory Work, X–Ray, Rehab Therapy, Respiratory 

Therapy, Durable Equipment, Nursing Supplies, Prosthetics, Orthotics, Dialysis, IV 

Therapy, and Oxygen; the dollars lost add up. 

The following table is a summary of charges for Program eligible veterans in residence for July 2009; August admissions added to show accelerating demand. 

Resident ID Number 44 131 130 149 * Pending * 

Admission Date 7/14/08 6/19/2009 7/17/2009 8/13/2009 8/21/2009 

Age 85 65 93 69 96 

Number Days in Residency July 2009 31 9 16 

Room & Board $10,272.00 $2,982.00 $5,302.00 

Pharmacy $1,640.00 $90.00 $597.00 

Labs/x ray -- $49.00 -- 

Rehab $2,425.00 -- $1,703.00 

Central Supply -- $54.00 -- 

IV Therapy -- $2,495.00 -- 

Totals $14,337.00 $5,670.00 $7,602.00 

Per Day Cost $462.48 $630.00 $475.13 

VA Reimbursement $(331.35) $(331.35) $(331.35) 

Daily Excess Costs $131.13 $298.56 $143.78 

* Cost Per Resident is Rising 

* Included To Demonstrate the Rapid Growth of Program Qualified Residents. 


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Is the 70 Percent Disabled Veterans Program a good deal for the veteran? For the 

short term, it may seem to be; but for the long term, it is a financial disaster. In 

fact, State Homes on the mainland have projected losses of as much as $300K per 

month. The Program is causing State Homes to profile admission of eligible veterans; the Veterans who were to be the prime beneficiaries of the Program will be 

least served by legislation created to improve the quality of their lives. 

Yuba Okutsu State Veterans Home supports the National Association of State 

Veterans Homes (NASVH) initiative 4-step solution: 

1. Have Congress pass a clarifying amendment to Section 211 of the Veterans 

Benefits, Health Care, and Information Technology Act of 2006 (Pub. L. No. 

109–461) (the ‘‘Act’’) postponing for 2 years, for Medicare-certified and Medicaid-certified State Veterans Homes only, the mandatory implementation of 

the Program while any adverse economic effects on States operating Medicare-certified and Medicaid-certified State Veterans Homes can be studied, 

using cost data for actual veterans residing in State Veterans Homes during 

this period. 

2. Allow State Veterans Homes, in interim, to serve service-connected disabled 

veterans under the existing VA Provider Agreement (‘‘Pro VA’’) for contract 

nursing homes. 

3. At the end of 18 months, the National Association of State Veterans Homes 

shall report to the Committees on Veterans Affairs of the United States Senate and House of Representatives with any recommendations that it has to 

modify the provisions of the Act. 

4. During this time, cost and payment data for residents of Medicare-certified 

and Medicaid-certified State Veterans Homes shall be compared among the 

Program, existing Medicare and Medicaid programs, and contracted programs between the VA and private nursing homes for the care of veterans 

with service-connected disabilities. 

Æ 


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