The history of the present-day Department of Veterans Affairs (VA) can be traced back to July 21, 1930, when President Hoover issued Executive Order 5398, creating an independent federal agency known as the Veterans Administration by consolidating many separate veterans' programs. 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. VA carries out its veterans' programs nationwide through three administrations and the Board of Veterans Appeals (BVA). The Veterans Health Administration (VHA) is responsible for veterans' health care programs. The Veterans Benefits Administration (VBA) is responsible for compensation, pension, vocational rehabilitation, education assistance, home loan guaranty and insurance among other things. The National Cemetery Administration's (NCA) responsibilities include maintaining 120 national cemeteries in 39 states and Puerto Rico. The Board of Veterans Appeals renders final decisions on appeals on veteran benefits claims. This report provides an overview of major issues facing veterans' health care during the 109 th Congress. The report's primary focus is on veterans and not military retirees . While any person who has served in the armed forces of the United States is regarded as a veteran, a military retiree is someone who has completed a full active duty military career (almost always at least 20 years of service), or who is disabled in the line of military duty and meets certain length of service and extent of disability criteria, and who is eligible for retired pay and a broad range of nonmonetary benefits from the Department of Defense (DOD) after retirement. A veteran is someone who has served in the armed forces (in most, but not all, cases for a few years in early adulthood), but may not have either sufficient service or disability to be entitled to post-service retired pay and nonmonetary benefits from DOD. Generally, all military retirees are veterans, but all veterans are not military retirees. Currently, VA health care services are generally available to all honorably discharged veterans of the U.S. Armed Forces who are enrolled in VA's health care system. In general, veterans have to enroll in the VA's health care system to receive care from VA. Typically veterans are enrolled in priority enrollment groups based on service-connectedness and income (described later in this report). 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 benefits. Veterans discharged at any time because of service-connected disabilities are not held to this requirement. Also eligible on a more limited basis are members of the armed forces Reserve components called to active duty and who serve the length of time for which they were activated, and National Guard personnel who are called to active duty by a federal declaration and serve the full period for which they were called. These servicemembers can receive care from VA for an initial two-year period for conditions presumably related to military service and for proven service-connected conditions thereafter. To provide some context on veterans' health care issues, the first part of this report provides a brief history of the Veterans Health Administration (VHA) and an overview of the evolution of eligibility for VA health care. The second part of the report discusses major issues facing veterans' health care and provides a summary of major legislation enacted into law and bills that have been passed by either the House or Senate. VA's largest and most visible operating unit is the Veterans Health Administration (VHA). Established in 1946 as the Department of Medicine and Surgery, it was succeeded in 1989 by the Veterans Health Services and Research Administration, and renamed the Veterans Health Administration (VHA) in 1991. The veterans' medical system was first developed to provide needed care to veterans injured or sick as a result of service during wartime. When there was excess capacity in VA hospitals, Congress gave wartime veterans without service-connected conditions access to VA hospitals, provided space was available and the veterans signed an oath indicating they were unable to pay for their care. At the end of World War II, the federal government undertook the task of increasing the number of VA medical facilities to meet the expected demand for health care for veterans returning with injuries or illnesses sustained during hostilities. The primary focus of the expansion was to immediately tend to the medical needs of returning combatants for acute care and then to address the long-term rehabilitation needs of more seriously injured veterans. Within a few years after the cessation of hostilities, the initial demand for acute care services for service-connected conditions diminished and VA initiated what was later to become its specialized services mission, in part because services such as spinal cord injury care, blind rehabilitation, and prosthetics were almost non-existent in the private medical market during the late 1940s. The VA system has evolved and expanded since World War II. Congress has enlarged the scope of the VA's health care mission and has enacted legislation requiring the establishment of new programs and services. Through numerous laws, some narrowly focused, others more comprehensive, Congress has also extended to additional categories of veterans' eligibility for the many levels of care the VA now provides. No longer a health care system focused only on service-connected veterans, the VA has also become a "safety net" for the many lower-income veterans who have come to depend upon it. Over the past decade, VA has transformed its health care system through structural and organizational changes. In the early 1990s VA recognized that its system might want to respond to certain changes taking place in the private health care market and began a process of restructuring and rationalizing services. VA established regional networks and decentralized certain budgetary authority to these networks. Furthermore, advances in medical technology, such as laser and other minimally invasive surgical techniques, allowed care previously provided in hospitals to be provided on an outpatient basis. Similarly, development of psychotherapeutic drugs to treat mental illness have led to fewer and shorter hospital admissions for psychiatric patients, as well as the deinstitutionalization of many long-term psychiatric patients. With the passage of eligibility reform legislation in 1996 ( P.L. 104-262 ) and in response to changing trends in medical practice, VA began to shift its focus from primarily inpatient hospital care to outpatient care in order to provide more accessible and efficient delivery of health care to veterans. Today, VA operates the nation's largest integrated health care system. VHA is divided into 21 Veterans Integrated Service Networks (VISNs, see Appendix A for a map of VISNs). Each network includes a management office responsible for making basic budgetary, planning and operating decisions. Each office oversees between five and 11 hospitals as well as community-based outpatient clinics (CBOCs), nursing homes and readjustment counseling centers (Vet Centers) located within each VISN. In FY2005, VA operated 157 hospitals, 750 CBOCs, 134 nursing homes and 42 domiciliary care facilities. , Unlike other federal health programs (such as Medicaid and Medicare), the VA is a direct service provider rather than a health insurer or payer for health care services. VHA offers a standardized medical benefits package that includes a full range of outpatient and inpatient services with an emphasis on preventive and primary care. As defined in regulations, VA medical benefits include among other things, preventive services, including immunizations, screening tests, and health education and training classes, primary health care diagnosis and treatment, prescription drugs, comprehensive rehabilitative services, mental health services including professional counseling, home health care, respite (inpatient), hospice, and palliative care, and emergency care. Some veterans are also eligible to receive long-term care including nursing home care, domiciliary care, adult day care, and limited dental care. In FY2005, there were 7.7 million enrolled veterans, and 4.8 million unique veteran patients received care from VA. That same fiscal year, VA treated 768,651 inpatients, 89,961 veterans in nursing home care units or in community nursing home facilities, and 30,118 veterans in home and community-based facilities. The VHA's outpatient clinics registered more than 52 million visits by veterans in FY2005. In addition to providing direct health care to veterans, since 1946 VA has been authorized to enter into agreements with medical schools and their teaching hospitals. Under these agreements, VA hospitals provide training for medical residents and students and appoint medical school faculty as VA staff physicians to supervise resident education and patient care. Across the nation, VA is currently affiliated with 107 medical schools, 54 dental schools, and over 1,000 other schools offering students allied and associated education degrees or certificates in 40 health profession disciplines. More than one-half of all practicing physicians in the U.S. received at least part of their clinical educational experiences in the VA health care system. In FY2005, more than 87,000 health care professionals received training in VA medical centers. VA is also the largest employer of registered nurses in the United States, with 32,582 nurses on its payroll in FY2005. To understand some of the issues facing veterans' health care programs discussed later in this report, it is important to get a sense of how veterans' eligibility for health care has evolved over time. While a full description of this evolution is beyond the scope of this report, this report will provide a brief overview. Generally, veterans' eligibility for VA health care services has evolved from treating veterans with service-connected conditions or veterans with low incomes to veterans with nonservice-connected conditions and higher incomes. Moreover, VA's health care coverage has changed from not having a well-defined medical benefits package to a standardized benefits package. Eligibility criteria used to determine which veterans must be served by VA and what type of medical care that they can be provided has undergone many changes since the establishment of VA. Congress has made several major changes throughout the years concerning the provision of hospital care, outpatient care and nursing home care.