Veterans Medical Care: FY2011 Appropriations
Released: 2011-06-13T00:00:00

Most Recent Developments

After a series of continuing resolutions (CRs)— P.L. 111-242 ; P.L. 111-290 ; P.L. 111-317 ; P.L. 111-322 ; P.L. 112-4 ; P.L. 112-6 , P.L. 112-8 —on April 15, 2011, the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ), was enacted into law. P.L. 112-10 provides $48.6 billion for VHA, a 7.8 % increase over the FY2010-enacted amount of $45.1 billion and 0.3% less than the President's request of $48.8 billion for FY2011 ( Table 1 ). Moreover, the Department of Defense and Full-Year Continuing Appropriations Act, 2011, provides an advance appropriation of $50.6 billion for medical services, medical support and compliance, and medical facilities accounts to be available in FY2012. This is the same as the Administration's request for the same three accounts ( Table 1 ).

The remainder of this report is structured into three major areas. The first area of the report includes sections providing an overview of the Department of Veterans Affairs (VA), the VA health care system, eligibility for VA health care, and a description of the veteran patient population. The second area includes sections describing the formulation of the Veterans Health Administration (VHA) budget, funding for the VHA, the FY2010 budget summary, and the FY2011 VHA budget. The third area of the report discusses major areas of congressional interest as they pertain to the FY2011 budget.

Overview of the Department of Veterans Affairs

The history of the present day VA can be traced back to July 21, 1930, when President Hoover issued Executive Order 5398 consolidating separate veterans' programs and creating an independent federal agency known as the Veterans Administration. On October 25, 1988, President Reagan signed legislation ( P.L. 100-527 ) creating a new federal Cabinet-level Department of Veterans Affairs to replace the Veterans Administration effective March 15, 1989.

The VA provides a range of benefits and services to veterans who meet certain eligibility rules including hospital and medical care, disability compensation and pensions, education, vocational rehabilitation and employment services, assistance to homeless veterans, home loan guarantees, administration of life insurance as well as traumatic injury protection insurance for servicemembers, and death benefits that cover burial expenses.

The department carries out its programs nationwide through three administrations and the Board of Veterans Appeals (BVA). The Veterans Health Administration (VHA) is responsible for health care services and medical and prosthetic research programs. The Veterans Benefits Administration (VBA) is responsible for, among other things, providing compensations, pensions, and education assistance. The National Cemetery Administration (NCA) is responsible for maintaining national veterans cemeteries; providing grants to states for establishing, expanding, or improving state veterans cemeteries; and providing headstones and markers for the graves of eligible persons, among other things.

The VA has also announced that it has begun the process of transforming itself "into a 21 st -century organization." The department has established six high priority performance goals to support this transformation: (1) reducing the disability claims backlog; (2) eliminating veteran homelessness; (3) automating the GI Bill benefit system; (4) establishing a Virtual Lifetime Electronic Record (VLER ); (5) improving mental health care; and (6) deploying a Veterans Relationship Management System.

The VA's budget includes both mandatory and discretionary spending accounts. Mandatory funding supports disability compensation, pension benefits, education, vocational rehabilitation, and life insurance, among other benefits and services. Discretionary funding supports a broad array of benefits and services including medical care. Figure 1 provides a breakdown of FY2010 budget allocations for both mandatory and discretionary programs. In FY2010 the total VA budget authority was approximately $110 billion; discretionary budget authority accounted for about 48.3% ($53.0 billion) of the total, with about 85% of this discretionary funding going toward supporting VA health care programs including medical research. For details on VHA appropriations from FY2005 through FY2010, see Appendix E .

The Veterans Health Care System

The Veterans Health Administration (VHA) operates the nation's largest integrated direct health care delivery system. While Medicare, Medicaid, and the Children's Health Insurance Program (CHIP) are also publicly funded programs, most health care services under these programs are delivered by private providers in private facilities. In contrast, the VA health care system could be categorized as a veteran-specific national health care system, in the sense that the federal government owns the medical facilities and employs the health care providers. The VA's health care system is organized into 21 geographically defined Veterans Integrated Service Networks (VISNs) (see Figure 2 ). Although policies and guidelines are developed at VA headquarters to be applied throughout the VA health care system, management authority for basic decision making and budgetary responsibilities are delegated to the VISNs. As of FY2010, VHA operates 153 hospitals (medical centers), 135 nursing homes, 783 community-based outpatient clinics (CBOCs), 6 independent outpatient clinics, and 299 Readjustment Counseling Centers (Vet Centers). In 2009, VA began a pilot Mobile Vet Center (MVC) program to improve access to services for veterans in rural areas, and the department has deployed 50 MVCs. VHA also operates 10 mobile outpatient clinics.

Congressionally appropriated medical care funds are allocated to the VISNs based on the Veterans Equitable Resource Allocation (VERA) system, which generally bases funding on patient workload. VISNs, in turn, allocate funds to the medical centers within their networks. Prior to the implementation of the VERA system, resources were allocated to facilities based primarily on their historical expenditures. While a thorough description of VERA is beyond the scope of this report, generally VERA has two types of funds known as General Purpose funds and Specific Purpose funds.

General Purpose funds encompass about 80% of VHA total budget allocations to the VISNs. The department generally allocates 94% of the congressional appropriation to the 21 VISNs within the first 45 days after enactment of the appropriation bill, with another 3% distributed within 90 days of enactment, and the remainder going to the VISNs over the remaining months of the fiscal year. General Purpose funds are comprised of 11 elements. These elements include basic care; complex care; adjustments for long stay patients; adjustments for high cost patients; geographic price adjustments; research support; education support; equipment; non-recurring maintenance; Priority Group 8 expansion; and mental health initiatives. Prior to FY2010, mental health initiatives were funded through the Specific Purpose fund. Beginning with FY2010 budget funding previously associated with the mental health initiatives, and funded through the Specific Purpose fund, has been incorporated into the overall mental health funding amount, and is now funded through the General Purpose fund. Table 2 provides VERA General Purpose fund allocations for the 21 networks in FY2010. It should be noted that VERA funding is not driven by veteran patient population alone, but is adjusted for differences in patient mix, high cost patients, and geographic costs, among other factors. Under VERA each network is provided an allocation that takes into account these unique characteristics and is also adjusted to account for those veterans who receive care in more than one network.

The Specific Purpose funds are given to the 21 VISNs during the fiscal year for specific activities including funding for prosthetics, state veterans nursing home per diems, clinical trainee salaries, readjustment counseling, homeless grant and per diem program, preventive and primary care transformation initiatives, and other specific purpose allocations to the program offices such as the foreign medical program which reimburses certain medical expenses of those veterans traveling abroad.

The VHA pays for care provided to veterans by private-sector providers on a fee basis under certain circumstances. This program pays non-VA health care providers to treat eligible veterans when medical services are not available at VA medical facilities or in emergencies when delays are hazardous to life or health. Fee basis care includes inpatient, outpatient, prescription medication, and long-term care services. Inpatient and outpatient care are also provided in the private sector to eligible dependents of veterans under the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). The VHA also provides grants for construction of state-owned nursing homes and domiciliary facilities and collaborates with the Department of Defense (DOD) in sharing health care resources and services.

Apart from providing direct patient care to veterans, VHA's other statutory missions are to conduct medical research, to serve as a contingency backup to the Department of Defense (DOD) medical system during a national security emergency, to provide support to the National Disaster Medical System and the Department of Health and Human Services as necessary, and to train health care professionals in order to provide an adequate supply of health personnel for VA and the nation.

Eligibility for Veterans Health Care

"The Promise of Free Health Care"

To understand the budget for VHA discussed in this report, it is important to understand eligibility for VA health care, the VA's enrollment process, and its enrollment priority groups (discussed later in this report). VA health care is not an entitlement program. Contrary to numerous claims made concerning "promises" to military personnel and veterans with regard to "free health care for life," not every veteran is automatically entitled to medical care from the VA. Prior to eligibility reform in 1996, provisions of law governing eligibility for VA care were complex and not uniform across all levels of care. All veterans were technically "eligible" for hospital care and nursing home care, but eligibility did not by itself ensure access to care.

The Veterans' Health Care Eligibility Reform Act of 1996, P.L. 104-262 , established two eligibility categories and required the VHA to manage the provision of hospital care and medical services through an enrollment system based on a system of priorities. P.L. 104-262 authorized the VA to provide all needed hospital care and medical services to veterans with service-connected disabilities, former prisoners of war, veterans exposed to toxic substances and environmental hazards such as Agent Orange, veterans whose attributable income and net worth are not greater than an established "means test," and veterans of World War I. These veterans are generally known as "higher priority" or "core" veterans (see Appendix A , and discussed in more detail below). The other category of veterans are those with no service-connected disabilities and with attributable incomes above an established means test (see Appendix C ).

P.L. 104-262 also authorized the VA to establish a patient enrollment system to manage access to VA health care. As stated in the report language accompanying P.L. 104-262 , "the Act would direct the Secretary, in providing for the care of 'core' veterans, to establish and operate a system of annual patient enrollment and require that veterans be enrolled in a manner giving relative degrees of preference in accordance with specified priorities. At the same time, it would vest discretion in the Secretary to determine the manner in which such enrollment system would operate."

Furthermore, P.L. 104-262 was clear in its intent that the provision of health care to veterans was dependent upon the available resources. The committee report accompanying P.L. 104-262 states that the provision of hospital care and medical services would be provided to "the extent and in the amount provided in advance in appropriations acts for these purposes. Such language is intended to clarify that these services would continue to depend upon discretionary appropriations."

VHA Health Care Enrollment

As stated previously, P.L. 104-262 required the establishment of a national enrollment system to manage the delivery of inpatient and outpatient medical care. The new eligibility standard was created by Congress to "ensure that medical judgment rather than legal criteria will determine when care will be provided and the level at which care will be furnished."

For most veterans, entry into the veterans' health care system begins by completing the application for enrollment. Some veterans are exempt from the enrollment requirement if they meet special eligibility requirements. A veteran may apply for enrollment by completing the Application for Health Benefits (VA Form 10-10EZ) at any time during the year and submitting the form online or in person at any VA medical center or clinic, or mailing or faxing the completed form to the medical center or clinic of the veteran's choosing (see Figure 3 ). Once a veteran is enrolled in the VA health care system, the veteran remains in the system and does not have to reapply for enrollment annually. However, those veterans who have been enrolled in Priority Group 5 ( Appendix A , discussed in more detail below) based on income must submit a new VA Form 10-10EZ annually with updated financial information demonstrating inability to defray the expenses of necessary care.

Veteran's Status

Eligibility for VA health care is based primarily on "veteran's status" resulting from military service. Veteran's status is established by active-duty status in the military, naval, or air service and an honorable discharge or release from active military service. A veteran with an "other than honorable" discharge or "bad conduct" discharge may still retain eligibility for VA health care benefits for disabilities incurred or aggravated during service in the military.

Generally, persons enlisting in one of the Armed Forces after September 7, 1980, and officers commissioned after October 16, 1981, must have completed two years of active duty or the full period of their initial service obligation to be eligible for VA health care benefits. Servicemembers discharged at any time because of service-connected disabilities are not held to this requirement. Also, reservists that were called to active duty and who completed the term for which they were called, and who were granted an other than dishonorable discharge, are exempt from the 24 continuous months of active duty requirement. National Guard members who were called to active duty by federal executive order are also exempt from this two-year requirement if they (1) completed the term for which they were called and (2) were granted an other than dishonorable discharge.

When not activated to full-time federal service, members of the reserve components and National Guard have limited eligibility for VA health care services. Members of the reserve components may be granted service-connection for any injury they incurred or aggravated in the line of duty while attending inactive duty training assemblies, annual training, active duty for training, or while going directly to or returning directly from such duty. In addition, reserve component service members may be granted service-connection for a heart attack or stoke if such an event occurs during these same periods. The granting of service-connection makes them eligible to receive care from the VA for those conditions. National Guard members are not granted service-connection for any injury, heart attack, or stroke that occurs while performing duty ordered by a governor for state emergencies or activities.

After veterans' status has been established, the VA next places applicants into one of two categories. The first group is composed of veterans with service-connected disabilities or with incomes below an established means test. These veterans are regarded by the VA as "high priority" veterans, and they are enrolled in Priority Groups 1-6 (see Appendix A ). Veterans enrolled in Priority Groups 1-6 include

veterans in need of care for a service-connected disability; veterans who have a compensable service-connected condition; veterans whose discharge or release from active military, naval, or air service was for a compensable disability that was incurred or aggravated in the line of duty; veterans who are former prisoners of war (POWs); veterans awarded the Purple Heart; veterans who have been determined by VA to be catastrophically disabled; veterans of World War I; veterans who were exposed to hazardous agents (such as Agent Orange in Vietnam) while on active duty; and veterans who have an annual income and net worth below a VA-established means test threshold.

The VA looks at applicants' income and net worth to determine their specific priority category and whether they have to pay copayments for nonservice-connected care. In addition, veterans are asked to provide the VA with information on any health insurance coverage they have, including coverage through employment or through a spouse. The VA may bill these payers for treatment of conditions that are not a result of injuries or illnesses incurred or aggravated during military service (see discussion on premiums and copayments below).

The second group of veterans is composed of those who do not fall into one of the first six priority groups—primarily veterans with nonservice-connected medical conditions and with incomes and net worth above the VA-established means test threshold. These veterans are enrolled in Priority Group 7 or 8. Appendix C provides information on income thresholds for VA health care benefits.

Operation Enduring Freedom (OEF), Operation Iraqi Freedom (OIF), and Operation New Dawn (OND) Veterans

The National Defense Authorization Act (NDAA), FY2008 ( P.L. 110-181 ), extended the period of enrollment for VA health care from two to five years for veterans who served in a theater of combat operations after November 11, 1998 (generally, OEF, OIF, and OND veterans who served in a combat theater).

According to the VA, currently enrolled combat veterans will have their enrollment eligibility period extended to five years from their most recent date of discharge. New servicemembers discharged from active duty on or after January 28, 2003, could enroll for a period of up to five years after their most recent discharge date from active duty. Veterans who served in a theater of combat, and who never enrolled, and were discharged from active duty between November 11, 1998, and January 27, 2003, may apply for this enhanced enrollment opportunity through January 27, 2011.

Generally, new OEF, OIF, and OND veterans are assigned to Priority Group 6, unless eligible for a higher Priority Group, and are not charged copays for medication and/or treatment of conditions that are potentially related to their combat service. Veterans who enroll in the VA health care system under this extended enrollment authority will continue to be enrolled even after the five-year eligibility period ends. At the end of the five-year period, veterans enrolled in Priority Group 6 may be re-enrolled in Priority Group 7 or 8, depending on their service-connected disability status and income level, and may be required to make copayments for nonservice-connected conditions. The above criteria apply to National Guard and Reserve personnel who were called to active duty by federal executive order and served in a theater of combat operations after November 11, 1998.

Medical Benefits Package

Once enrolled all veterans are offered a standard medical benefits package. This package includes a full range of inpatient, outpatient, and preventive medical services such as the following: medical, surgical, and mental health care, including care for substance abuse; prescription drugs, including over-the-counter drugs and medical and surgical supplies available under the VA national formulary system; durable medical equipment and prosthetic and orthotic devices, including eyeglasses and hearing aids; home health services, hospice care, palliative care, and institutional respite care; and noninstitutional adult day health care and noninstitutional respite care; and periodic medical exams, among other services. It should be noted that eligibility for dental benefits is based on very specific guidelines and differs significantly from eligibility requirements for medical care.

The medical benefits package does not include the following: abortions and abortion counseling; in vitro fertilization; drugs, biologicals, and medical devices not approved by the Food and Drug Administration (FDA) unless the treating medical facility is conducting formal clinical trials under an Investigational Device Exemption (IDE) or an Investigational New Drug (IND) application, or the drugs, biologicals, or medical devices are prescribed under a compassionate use exemption; gender alterations; hospital and outpatient care for a veteran who is either a patient or inmate in an institution of another government agency if that agency has a duty to give the care or services; and membership in spas and health clubs.

Premiums and Copayments

Veterans who are enrolled in the VA health care system do not pay in any premiums. However, some veterans are required to pay copayments for medical services and outpatient medications related to the treatment of a nonservice-connected condition (see Appendix B ). Veterans in Priority Group 1 (those who have been rated 50% or more service-connected) are never charged a copayment even for treatment of a nonservice-connected condition. For veterans in other priority groups, VHA currently has four types of nonservice-connected copayments for which veterans may be charged: outpatient, inpatient, extended care services, and medication. Veterans in all priority groups are not charged copayments for a number of outpatient services including the following: publicly announced VA health fairs; screenings and immunizations; smoking and weight loss counseling; telephone care and laboratory services; flat film radiology; and electrocardiograms.

For primary care outpatient visits there is a $15 copayment charge and for specialty care outpatient visits a $50 copayment. Veterans do not receive more than one outpatient copayment charge per day. That is, if the veteran has a primary care visit and a specialty care visit on the same day, the veteran only pays for the specialty care visit. For veterans required to pay an inpatient copayment charge, rates vary based upon whether the veteran is enrolled in Priority Group 7 or not. Veterans enrolled in Priority Group 8 and certain other veterans are responsible for VA's full inpatient copayment and veterans enrolled in Priority Group 7 and certain other veterans are responsible for paying 20% of VA's inpatient copayment. Veterans in Priority Groups 1, 2, 3, 4, and 5 do not have to pay inpatient or outpatient copayments. Veterans in Priority Group 6 may be exempt due to special eligibility for treatment of certain conditions.

For veterans required to pay extended care service copayments these are based on three levels of nonservice-connected care including inpatient, non-institutional and adult day health care. Actual copayments vary depending on the veteran's financial situation. For medication copayments, veterans are not billed if they have a service-connected disability rated 50% or greater, they are former Prisoners of War, or if their medications are related to certain eligibility exceptions. Veterans enrolled in Priority Groups 2 thru 6 have a $960 calendar year cap on the amount that they can be charged for these copayments. Veterans who are unable to pay VA's copayment charges could complete requests for assistance including waivers, hardships, compromises and repayment plans.

VHA bills private health insurers for medical care, supplies and prescriptions provided to veterans for their nonservice-connected conditions. VA cannot bill Medicare, but it can bill Medicare supplemental health insurance carriers for covered services. Veterans are not responsible for paying any remaining balance of VA's insurance claim not paid or covered by their health insurance. Any payment received by VA is used to offset ''dollar for dollar'' a veteran's VA copayment responsibility.

Priority Groups and Scheduling Appointments

Under current VHA policy, VHA provides priority care for non-emergency outpatient medical services for any condition of a service-connected veteran rated 50% or more or for a veteran's service-connected disability. Furthermore, priority scheduling of any service-connected veteran must not impact the medical care of any other previously scheduled veteran. Veterans with service-connected conditions are not prioritized over other veterans with more acute health care needs. Emergency or urgent care is provided on an expedient basis. According to VHA policy emergency and urgent care needs take precedence over a priority of service-connection.

The Veteran Patient Population

In FY2010 approximately 8.4 million of the 23.1 million living veterans in the nation were enrolled in the VA health care system ( Table 3 ). From FY2007 through FY2010 the total number of enrollees has increased by 7.7%. Of the total number of enrolled veterans in FY2010, VA anticipated treating approximately 5.5 million unique veteran patients. For FY2011, VHA estimates that it will treat about 5.6 million unique veteran patients ( Table 4 ), and of these VA anticipates treating more than 439,000 Operation Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF) veterans, an increase of over 20,000 (or 5%) above the FY2010 level. In FY2011, OEF and OIF patients would represent 7.2% of the overall VA patients served.

VHA also provides medical care to certain non-veterans; this population is expected to increase by over 11,000 patients or 2.2 % over the FY2010 level. In total, including non-veterans, VHA is to treat nearly 6.1 million patients in 2011, an increase of 2.9 % over the number of patients treated in FY2010 ( Table 4 ). Between FY2007 and FY2010, the number of patients treated by VA has grown by 10% ( Table 4 ).

The total number of outpatient visits, including visits to Vet Centers, reached 74.6 million during FY2009 and is projected to increase to approximately 78.5 million in FY2010 and 82.7 million in FY2011. VHA estimates that in FY2010 it will spend approximately 57.8% of its medical services account obligations on outpatient care.

Formulation of VHA's Budget

Historically, the major determinant of VHA's budget size and character was the number of operating beds—which was controlled by Congress. The preliminary budget estimate, to a large extent, was based on the funding and activity of the previous year. VHA developed system-wide workload estimates, by type of care, by forecasts submitted by field stations. Unit costs were derived from the field stations' reports of the estimated distribution of expenses by type of care. Costs associated with new programs were estimated by VA central office and added to the budget estimate. The costs associated with staffing improvements, pay increases and inflation were also added to this estimate. Therefore, it could be stated that the principal assumption at each phase of the budget formulation process was that the preceding year's budget was the starting point.

In 1996, Congress enacted the Departments of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act of 1997 ( P.L. 104-204 ). This act required VHA to develop a plan for the allocation of health care resources to ensure that veterans eligible for medical care who have similar economic status and eligibility priority have similar access to such care, regardless of where they reside. The plan was to "account for forecasts in expected workload and to ensure fairness to facilities that provide cost-efficient health care."

In response to the above-mentioned Congressional mandate, as well as the mandate in the Health Care Eligibility Reform Act of 1996 ( P.L. 104-262 ) that required the VHA to establish a priority-based enrollment system, VHA established the Enrollee Health Care Projection Model in 1998. The VHA's the Enrollee Health Care Projection Model (EHCPM), which has evolved over time, develops estimates of future veteran enrollment, enrollees' expected utilization of health care services, and the costs associated with that utilization. These 20-year projections are by fiscal year, enrollment priority, age, Veterans Integrated Service Networks (VISN), market, and facility. The VHA budget is formulated using the model projections.

VHA's budget request to Congress begins with the formulations of the budget based on the EHCPM to estimate the demand for medical services among veterans in future years. These estimates are then used to develop a budget request that is then included with the total VA budget request to Congress.

Funding for the VHA

The VHA is funded through multiple appropriations accounts that are supplemented by other sources of revenue. Although the appropriations account structure has been subject to change from year to year, the appropriation accounts used to support the VHA traditionally include medical care, medical and prosthetic research, and medical administration. In addition, Congress also appropriates funds for construction of medical facilities through a larger appropriations account for construction for all VA facilities. In FY2004, "to provide better oversight and [to] receive a more accurate accounting of funds," Congress changed the VHA's appropriations structure. The Department of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act, 2004 ( P.L. 108-199 , H.Rept. 108-401 ), funded VHA through four accounts: (1) medical services, (2) medical administration (currently known as medical support and compliance), (3) medical facilities, and (4) medical and prosthetic research. Provided below are brief descriptions of these accounts.

Medical Services

The medical services account covers expenses for furnishing inpatient and outpatient care and treatment of veterans and certain dependents, including care and treatment in non-VA facilities; outpatient care on a fee basis; medical supplies and equipment; salaries and expenses of employees hired under Title 38, United States Code; and aid to state veterans homes. In its FY2008 budget request to Congress, the VA requested the transfer of food service operations costs from the medical facilities appropriations to the medical services appropriations. The House and Senate Appropriations Committees concurred with this request.

Medical Support and Compliance (Previously Medical Administration)

The medical support and compliance account provides funds for the expenses related to the administration of hospitals, nursing homes, and domiciliaries, billing and coding activities, public health and environmental hazard programs, quality and performance management, medical inspection, human research oversight, training programs and continuing education, security, volunteer operations, and human resources management.

Medical and Prosthetic Research

This account provides funding for VA researchers to investigate a broad array of veteran-centric health topics, such as treatment of mental health conditions; rehabilitation of veterans with limb loss, traumatic brain injury, and spinal cord injury; organ transplantation; and the organization of the health care delivery system. VA researchers receive funding not only through this account but also from the Department of Defense (DOD), the National Institutes of Health (NIH), and private sources.

Unlike other federal agencies such as NIH and DOD, VA does not have the statutory authority to make research grants to colleges and universities, cities and states, or any other non-VA entities. In general, VA's research program is intramural, that is, research is performed by VA investigators at VA facilities and approved off-site locations.

Medical Care Collections Fund (MCCF)

In addition to direct appropriations accounts mentioned above, the Committees on Appropriations include medical care cost recovery collections when considering the amount of resources needed to provide funding for the VHA. The Consolidated Omnibus Budget Reconciliation Act of 1985 ( P.L. 99-272 ), enacted into law in 1986, gave the VHA the authority to bill some veterans and most health care insurers for nonservice-connected care provided to veterans enrolled in the VA health care system, to help defray the cost of delivering medical services to veterans. This law also established means testing for veterans seeking care for nonservice-connected conditions. However, P.L. 99-272 did not provide the VA with specific authority to retain the third-party payments it collected and VA was required to deposit these third-party collections in the General Fund of the U.S. Treasury.

The Balanced Budget Act of 1997 ( P.L. 105-33 ) gave the VHA the authority to retain these funds in the Medical Care Collections Fund (MCCF). Instead of returning the funds to the Treasury, the VA can use them for medical services for veterans without fiscal year limitations. To increase the VA's third-party collections, P.L. 105-33 also gave the VA the authority to change its basis of billing insurers from "reasonable costs" to "reasonable charges." This change in billing was intended to enhance VA collections to the extent that reasonable charges result in higher payments than reasonable costs. In FY2004, the Administration's budget requested consolidating several existing medical collections accounts into one MCCF. The conferees of the Consolidated Appropriations Act of 2004 ( H.Rept. 108-401 ) recommended that collections that would otherwise be deposited in the Health Services Improvement Fund (former name), Veterans Extended Care Revolving Fund (former name), Special Therapeutic and Rehabilitation Activities Fund (former name), Medical Facilities Revolving Fund (former name), and the Parking Revolving Fund (former name) should be deposited in MCCF. The Consolidated Appropriations Act of 2005 ( P.L. 108-447 , H.Rept. 108-792 ) provided the VA with permanent authority to deposit funds from these five accounts into the MCCF. The funds deposited into the MCCF would be available for medical services for veterans. These collected funds do not have to be spent in any particular fiscal year and are available until expended.

As shown in Table 5 MCCF collections increased from $1.5 billion in FY2003 to $2.8 billion in FY2009. During this same period, first-party collections (for pharmacy, inpatient and outpatient and long-term care copayments) increased by 30%, from $685 million to $892 million. In FY2009, first-party collections represented approximately 32% of total MCCF collections.

FY2010 Budget Summary62

On February 26, 2009, the President submitted a preliminary budget outline for FY2010, and submitted his full FY2010 budget proposal to Congress on May 7, 2009. The Administration requested a total of $45.1 billion for VHA (excluding collections). This was a 7.5% increase over the FY2009 enacted level. Including total available resources (including medical care collections), the President's budget would have provided approximately $48 billion for VHA.

On July 10, the House passed its version of the Military Construction and Veterans Affairs Appropriations Act, 2010 ( H.R. 3082 , H.Rept. 111-188 ). The House-passed bill provided a total of $45.1 billion for VHA. H.R. 3082 also provided $48.2 billion in advance appropriations for VHA to be available in FY2011. On November 17, the Senate passed H.R. 3082 as amended. H.R. 3082 as amended by the Senate provided a total of $45.2 billion for VHA, a $160.0 million increase over the House passed amount, and $157.6 million over the President's request.

The Consolidated Appropriations Act was signed into law on December 16, 2009 ( P.L. 111-117 , H.Rept. 111-366 ). Division E of the Consolidated Appropriations Act 2010 included a compromised version of the House and Senate passed versions of Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2010. The Consolidated Appropriations Act provided a total of $45.1 billion for VHA, same as the Administration's request for FY2010, and 7.4% over the FY2009 enacted amount. P.L. 111-117 included an advance appropriation of $48.2 billion for the medical services, medical support and compliance, and medical facilities accounts to be available in FY2011.

FY2011 VHA Budget

President's Request

The Obama Administration released its FY2011 budget on February 1, 2010. The Administration's FY2011 budget request for three of the four accounts of VHA (medical services, medical support and compliance, medical facilities) was same as the funding amounts provided in the MILCON-VA Appropriations Act of 2010 ( P.L. 111-117 ) which was $48.1 billion. Moreover, the President's request included $590 million of the medical and prosthetic research account. In total the FY2011 budget request for VHA is $48.8 billion excluding medical care collections (see Table 6 ). For FY2011, the Administration estimates that it will obtain $3.4 billion in medical collections, for a total VHA funding level of $52.1 billion. This is $4.1 billion, or 8.6% above FY2010 levels.

Furthermore, as required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the President's budget requested $50.6 billion in advance appropriations for the three medical care appropriations (medical services, medical support and compliance, and medical facilities) for FY2012. In FY2012, the Administration's budget request would have provided $39.6 billion for the medical services account, $5.5 billion for medical support and compliance account, and $5.4 billion for the medical facilities account.

House Action

On July 28, 2010, the House passed its version of the version of the MILCON-VA Appropriations bill for FY2011 ( H.R. 5822 ; H.Rept. 111-559 ). The House-passed bill included $48.8 billion for VHA for FY2011, the same as the President's request ( Table 6 ). For FY2012, H.R. 5822 provided an advance appropriation of: $39.6 billion for the medical services; $5.5 billion for the medical support and compliance account; and $5.4 billion for the medical facilities account. The House-passed bill recommended $590 million for the medical and prosthetic research account, an increase of $9 million above the FY2010 enacted level and the same as the budget request. During floor debate of H.R. 5822 , among other amendments, the House adopted H.Amdt. 729 , which would have instructed the VA to set aside at least $20 million from the general operating expenses account for suicide prevention outreach via direct advertising and the use of online social media.

Senate Committee Action

On July 15, 2010, the Senate Appropriations Committee marked up its version of the MILCON-VA Appropriations bill for FY2011 ( S. 3615 ; S.Rept. 111-226 ). The committee recommendation included $120 million above the FY2011 Administration's request, and the House Appropriations Committee recommendation. This amount included $100 million for medical services account, and $20 million for the medical facilities account ( Table 6 ). In total, under S. 3615 , VHA would have received $48.9 billion without medical care collections. All other amounts for accounts that comprise the VHA were the same as the Administration's request. Likewise, the Senate Appropriations Committee advance appropriations recommendations for FY2012 was the same as the House Appropriations Committee recommendations and the President's request (see Table 6 ).

Full-Year Continuing Resolution

At the beginning of the fiscal year, on October 1, 2010, FY2011 funding levels for most VA accounts had not been enacted by Congress. Although the budget debate continued six months into the new fiscal year, funding for the medical services, medical support and compliance, and medical facilities accounts of VA had already been appropriated by the Consolidated Appropriations Act ( P.L. 111-117 , H.Rept. 111-366 ), which provided advance appropriations for these accounts. Therefore, these accounts were not affected by the series of continuing resolutions (CRs) passed by Congress.

On April 15, 2011, the President signed into law the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( H.R. 1473 , P.L. 112-10 ). This act provided a total of $52.0 billion for VHA for FY2011. This includes $48.6 billion in new budget authority and $3.4 billion in medical care collections (MCCF). Additionally, P.L. 112-10 provided $50.6 billion in advance appropriations for FY2012 ( Table 6 ).

Major Areas of Congressional Interest

Family Caregivers

It has been reported that "many severely injured service members depend on family members for daily caregiving." According to the 2007 Report of the President's Commission on Care for America's Returning Wounded Warriors, of a random sample of 1,730 OEF and OIF veterans, 21% of active-component, 15% of reserve-component, and 24% of retired service members had a family member or friend who had been forced to leave a job to care for an OIF or OEF veteran full-time. In response to these findings, and testimony from family members, Congress enacted the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ). Among other things, this law would establish a program of comprehensive assistance for family caregivers of any veteran who is undergoing medical discharge from the Armed Forces, has a serious injury incurred or aggravated in the line of duty on or after September 11, 2001, and is in need of personal care services. According to the House and Senate Appropriations Committee reports to accompany the FY2011 MILCON-VA Appropriations bills, funding has been included to implement the caregiver provisions in P.L. 111-163 for eligible veterans.

Mental Health Care

Since 2001, more than 2.1 million U.S. troops have deployed in support of Operations Enduring Freedom (OEF) and Iraqi Freedom (OIF). Of this number, around 1.1 million OEF and OIF veterans have left active duty and become eligible for VA health care, and 47.4% of separated OEF and OIF veterans have sought VA health care. While the majority of these veterans function well, according to some studies, approximately 10%-20% evidence psychological difficulties significant enough to warrant treatment. While posttraumatic stress disorder (PTSD) has received the most publicized attention to date, service in OEF and OIF is also associated with generalized anxiety, depression, substance abuse, physical health problems, aggression, risk-taking behavior, and suicide.

Providing adequate resources to treat mental health conditions of veterans is a major area of interest for Congress. For example, in its View and Estimates letter to the House Budget Committee, the House Committee on Veterans' Affairs states:

[the] Committee acknowledges the VA's robust investments in mental health; however, addressing mental health issues continues to be a challenge. This is evidenced by the rising rates of suicide, incarceration, and homelessness among our veterans. The Committee believes that the VA must not only expand existing efforts but also must explore new evidence-based initiatives with a proven track record for yielding positive program results.

In FY2010 VHA's budget for mental health care is estimated to be $4.8 billion, and it is estimated to reach $5.2 billion in FY2011 ( Table 7 ). VHA has also increased the number of mental health providers by over 6,000 full-time equivalent (FTE) in its system from FY2008 through FY2010 ( Table 7 ).

Priority Group 8 Veterans

Since January 17, 2003, the VA has not enrolled veterans in Priority Group 8 unless they had been previously enrolled in another priority group and no longer qualified for enrollment in that previous priority group (see Appendix A ). Since the suspension was promulgated, veterans advocates have urged Congress to lift the suspension on Priority Group 8 veterans since they believe that all veterans must be able to receive care from the VA because they have served their country.

The Veterans Health Care Eligibility Reform Act of 1996 ( P.L. 104-262 ) included language that stipulated that medical care to veterans will be furnished to the extent appropriations were made available by Congress on an annual basis. Based on this statutory authority, the Secretary of Veterans Affairs announced on January 17, 2003, that VA would temporarily suspend enrolling Priority Group 8 veterans. Those who enrolled prior to January 17, 2003, in VA's health care system were not to be affected by this suspension. VA claimed that, despite its funding increases, it could not provide all enrolled veterans with timely access to medical services because of the increase in the number of veterans seeking care from VA.

The Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110-329 ) was enacted on September 30, 2008. The accompanying report language stated that funding "has been provided within the Medical Services; Medical Support and Compliance; Medical Facilities; Construction, Minor Projects; and Information Technology Systems accounts to support increased enrollment for Priority 8 veterans whose income exceeds the current veterans means test and geographic means test income thresholds by 10% or less." P.L. 110-329 provided $375 million for FY2009 to fund this increased enrollment. On January 21, 2009, VA issued regulations indicating that it plans to enroll an estimated 258,705 new Priority Group 8 veterans. VA began enrolling new veterans starting June 15, 2009. According to VHA, it is estimated that 193,000 veterans will enroll for care by the end of 2010 due to this policy change. VA has stated that in 2011 VA will further expand health care eligibility for Priority Group 8 veterans to those whose incomes exceed the geographic and VA means-test thresholds by no more than 15% compared to the levels in effect prior to expanding enrollment in 2009. It is estimated that this additional expansion of eligibility for care will result in 99,000 more enrollees in 2011, bringing the total number of new enrollees from 2009 to the end of 2011 to 292,000. The President's budget request for FY2011estimates that by FY2013 nearly 550,000 eligible Priority Group 8 veterans will be enrolled into the VA health care system.

Appendix A. VA Priority Groups and Their Eligibility Criteria

Appendix B. Copayments for Health Care Services: 2010

OEF/OIF/OND Combat Veterans Enhanced Eligibility for Health Care Benefits: Combat veterans discharged from active duty on or after January 28, 2003, are eligible for enrollment in Priority Group 6 for five years following discharge unless eligible for a higher enrollment priority. Combat veterans discharged from active duty before January 28, 2003, who applied for enrollment on or after January 28, 2008, were eligible for enrollment in Priority Group 6 until January 27, 2011. After the special eligibility period ends, these veterans will be reassigned to the appropriate priority group and will be subject to copayments if applicable. Copayments are applicable for Priority Group 6 combat veteran enrollees for care related to a condition that is congenital or developmental (e.g., scoliosis) that existed before military service (unless aggravated by combat service) or has a specific etiology that began after military service, such as a common cold, etc.

Appendix C. Financial Income Thresholds for VA Health Care Benefits, Calendar Year 2010

Appendix D. Increase to Financial Income Thresholds for VA Health Care Enrollment, in Priority Group 8, Calendar Year 2010

Appendix E. VHA Appropriations by Account FY2005-FY2009