STATEMENT OF
GORDON MANSFIELD
DEPUTY SECRETARY FOR VETERANS AFFAIRS
DEPARTMENT OF VETERANS AFFAIRS
BEFORE THE
UNITED STATES SENATE
COMMITTEE ON VETERANS' AFFAIRS

June 22, 2004

    Good Afternoon Mr. Chairman and Members of the Committee:

    Thank you for inviting me here today to present the Administration’s views on a number of bills that would primarily affect Department of Veterans Affairs (VA) programs of veterans benefits and services.

    S. 2483 Compensation Cost‑of‑Living Adjustment

    Mr. Chairman, I will begin by addressing S. 2483. This bill would increase administratively the rates of disability compensation for veterans with service‑connected disabilities and of dependency and indemnity compensation for certain survivors of veterans, effective December 1, 2004. As provided in the President’s fiscal year (FY) 2005 budget request, the rate of increase would be the same as the cost‑of‑living adjustment (COLA) that will be provided under current law to Social Security recipients, which is currently estimated to be 2.4 percent. We believe this proposed COLA is necessary and appropriate to protect the affected benefits from the eroding effects of inflation. Therefore we support S. 2483.

    Because revised economic assumptions for FY 2005 were released on June 15, 2004, we cannot yet provide accurate cost estimates for FY 2005 and for the period FY 2005 through FY 2014. We will provide a cost estimate to the Committee as soon as it is available.

    S. 2484 Physicians/Dentists Special Pay

    Mr. Chairman, we very much appreciate your having introduced, by request, S. 2484. S. 2484 is an important VA proposal to overhaul physician and dentist pay to greatly enhance VA’s ability to recruit and retain high quality physicians and dentists, particularly high‑cost medical specialists, to treat the Nation’s veterans. It would completely revise the VA physician and dentist pay system to allow VA to adjust physician and dentist compensation levels according to market forces. The system’s simplicity and flexibility would ensure that VA physician and dentist compensation levels and practices do not become outdated over time due to statutory limits.

    The VA compensation structure for physicians and dentists has not changed since 1991. The current system is extremely complex, comprising seven or eight different special pay components in addition to basic pay. The system offers insufficient flexibility to respond to the changing competitive market for many of the medical specialties, especially for the highest paid medical subspecialties. VA is unable to offer competitive positions for critical subspecialties, such as Anesthesiology, Radiology, Cardiology, Urology, Gastroenterology, Oncology, and Orthopedic Surgery. National shortages of qualified physicians in these specialties have driven compensation levels dramatically upward. In these shortage specialties, VA total compensation lags behind the private or academic sectors by 35 percent or more. Although Congress did increase the amounts of special pay for dentists in 2000, those increases did not bring VA pay up to the levels in private dental practice. The effects of noncompetitive pay and benefits are reflected in dramatic increases in VA’s reliance on expensive scarce medical specialist contracts and fee‑basis care.

    S. 2484 would

    establish a three‑tiered system of base pay, market pay, and performance‑based pay. The first tier, a uniform base pay band, would apply to all positions in VHA without grade distinctions. The proposed range is Chief grade, step 10 of the VA Physician/Dentist Schedule to Level V of the Executive Schedule, from roughly $110,000 to $125,000. This change would dramatically simplify hiring and employment and facilitate reassignments and position changes. Placement in this band would be based on the individual’s qualifications. The second tier, the market pay band, would be determined according to geographic area, specialty, assignment, personal qualifications and individual experience. It would be indexed to the salaries of similarly qualified non‑Department physicians, dentists, and health‑care executives. The flexibility of this tier would allow VA to keep pace with the market, both on upward and downward trends. The third tier would be linked to performance, and would be paid for discrete achievements in quality, productivity, and support of corporate goals. VA facilities would be able to authorize performance pay of up to $10,000 for physicians and dentists below the Chief of Staff (CoS) level. VA would benchmark the sum of all three bands to the 50th percentile of the Association of American Medical Colleges (AAMC) Associate Professor compensation (for physicians) and 75 percent of American Dental Association (ADA) net private practice income (for dentists).

    Flexible Schedules for Registered Nurses

    S. 2484 also includes provisions to help make VA more competitive in its ongoing efforts to recruit and retain registered nurses and other health care personnel. I am especially pleased that the bill would permit enhanced flexibility in scheduling tours of duty for registered nurses. Such flexibility would permit our facilities to offer our registered nurses schedule options comparable to those often available at private and other non‑VA hospitals and medical centers. In prior testimony before this Committee, we have noted the projected increase in the number of aging veterans and increased enrollment in the VA health care system by veterans of all ages over the next several years and the projected national shortage of registered nurses. VA’s health care providers are its most important resource in delivering high‑ quality, compassionate care to our Nation’s veterans. VA’s nurses are critical front‑line components of the VA health care team. We must be able to recruit and retain well‑qualified nurses. The ability to offer compensation, employment benefits and working conditions comparable to those available in their communities is critical to our ability to recruit and retain nurses, particularly in highly competitive labor markets and for hard‑to‑ fill specialty assignments. Thanks to the efforts of this Committee and the House Veterans’ Affairs Committee, VA has been able to offer generally competitive pay for nurses in most markets. Enactment of S. 2484 would permit VA to continue meeting the increasing challenge of recruiting and retaining sufficient nurses and other health care professionals to meet its patient care needs.

    S. 2485 Enhanced‑Use Lease Program Improvements

    This bill contains provisions designed to improve VA’s enhanced‑ use lease program under 38 U.S.C. S.S. 8161 et seq. We acknowledge the need to reform the enhanced‑use (EU) leasing process to make it more efficient, as recommended by the Capital Asset Realignment for Enhanced Services (CARES) Commission’s February 2004 report to the Secretary, and we appreciate the Committee’s interest in this subject. We note that such interest already has led to inclusion of many of this bill’s provisions in legislation enacted as Public Law 108‑170 (i.e., requiring only one notice to Congress of VA’s intent to enter into an EU lease, reducing the congressional notice and review period before executing such lease from 90 to 45 days, reducing by the same number of days the congressional notice and review period regarding a planned disposal of EU leased property, giving the Secretary sole discretion and control of such property disposal by eliminating GSA involvement in the process, and authorizing use of EU lease proceeds to reimburse VA appropriations for expenses incurred in developing additional EU leases). That legislation, together with other initiatives we are pursuing, will help us to significantly reduce the time required to consummate these lease transactions.

    Mr. Chairman, we also appreciate the provisions that recognize our EU lease projects can and do involve initiatives not only of the Veterans Health Administration, but also of the Veterans Benefits Administration (VBA) and National Cemetery Administration (NCA). In this regard, section 3 would authorize EU leases implementing VBA and NCA business plans providing for applying lease consideration to programs and activities of those Administrations. Further, it would direct that net proceeds from VBA or NCA EU leases be credited to applicable appropriations of the affected Administration. We are studying the budgetary impact of the latter provision and, following executive‑branch review, will advise the Committee of our views.

    Finally, should a Capital Asset Fund be established (as proposed under this bill), we would support having the proceeds from a disposal of EU lease property deposited into such fund as provided by this bill.

    Disposal of VA Property

    S. 2485 would authorize VA to dispose of its excess real property by sale, transfer or exchange to a Federal agency, a state or political subdivision of a state or to any public or private entity and to retain the proceeds generated by the disposals. Under the proposal, the disposal of real property would be exempt from GSA’s requirements in 40 U.S.C. S.S. 521, 522 and 541‑545 and those in the McKinney‑Vento Homeless Assistance Act (which provides that unused or underutilized Federal real property may be used to assist the homeless). VA would receive compensation equal to the fair market value of the property, and the proceeds would be deposited in a Capital Asset Fund (the “Fund”), as provided for by this legislation. The bill would also terminate the Nursing Home Revolving Fund and deposit funds therein into the Fund.

    Amounts in the Fund would have to be used for the costs of actual or planned disposals of real estate, including demolition, environmental cleanup, necessary improvements to facilitate the sales, transfers or exchanges, and administrative expenses. They could also be used for non‑recurring VA capital projects.

    We support S. 2485 because it would eliminate an existing disincentive to the disposal of Departmental real property. Currently, VA must report all transfers of real property valued in excess of $50,000 (to another Federal agency or to a state or a political subdivision of a state for fair market value) in its annual budget document. This is administratively burdensome. Further, absent extension of current appropriations law allowing proceeds from the disposal of excessed property to be deposited in the Medical Care Collections Fund, provisions in title 38, United States Code, require such proceeds to be deposited into the Nursing Home Revolving Fund. S. 2485 would enhance VA’s ability to manage Departmental capital resources, while promoting efficiencies and cost savings. However, we suggest the proposal be amended to provide that VA receive consideration not less than the fair market value of the disposed property to maximize the Government’s return.

    Limits on Disposal Authority

    S. 2485 would also limit VA’s authority to dispose of real property in excess of the major medical facility project dollar limitation unless the disposal has been in the budget justification documents for the current fiscal year. The bill would also require VA to receive consideration equal to the fair market value of the property. Proceeds from disposals would be similarly deposited in the Fund.

    VA supports this proposal. However, we again recommend that the bill language be amended to require VA receive consideration that is not less than the fair market value of the property.

    Advance Planning Funding for Major Medical Facilities

    S. 2485 would also exempt projects that have already been authorized by law from current statutory notice and wait requirements that apply to certain major medical facility projects. It would also do so for such projects that are included in the President’s budget. VA supports this proposal.

    National Cemetery Administration Property

    We are pleased that S. 2485 also includes VA’s proposal to permit the leasing of unused or underutilized real property that is administered by the National Cemetery Administration. These leases would be limited to a maximum term of ten years. Leases to a public or non‑profit organization would not be required to be advertised. Consideration for these leases could be monetary or, in whole or in part, maintenance, protection or restoration of the leased property. Proceeds would be deposited in a special account in the Treasury, The National Cemetery Administration Facilities Operation Fund (the “NCA Fund”), and available until expended. The NCA Fund would consist of amounts appropriated by law, the proceeds from the leases of land or buildings or agricultural licenses, and any other amounts authorized by law. Again, we appreciate your inclusion of this VA proposal in the bill and strongly urge its enactment.

    S. 2486 Omnibus Education, Housing, Health Care, and other Benefits

    Mr. Chairman, with one exception, we do not yet have cleared positions or cost estimates on the education benefit provisions in S. 2486. We will supply those for the record.

    Title I‑‑Education Provisions

    S. 2486 would increase to $2,000 dollars the maximum amount of contribution an individual may make under the Montgomery GI Bill (MGIB)‑Active Duty Program to augment the monthly amount of basic educational assistance he or she may receive under that program.

    Under current law, service members who elect to participate in the MGIB agree to have their basic pay reduced by $1200 (i.e., $100 per month for the first 12 months of active service) to establish entitlement under that program. Participants are allowed to increase the monthly rate of MGIB educational benefits they will receive after service by making contributions beyond the initial $1200 basic pay reduction, at any time prior to leaving service but not more frequently than monthly, in an amount up to an additional $600 in multiples of $20. The monthly rate of basic educational assistance is thereby increased by $5 per month for each $20 so contributed, yielding an additional $150 in benefits per month for the maximum $600 in‑service contribution, or an additional $5,400 for the full 36 months of MGIB entitlement.

    If this proposal were enacted, the maximum in‑service contribution would increase to $2,000 yielding $18,000 of MGIB benefits.

    Pilot Program to Assess Feasibility of Extending the Delimiting Period for Using Chapter 30 MGIB Education Benefits

    S. 2486 would also require VA to establish a four‑year pilot program to determine the feasibility and advisability of extending the delimiting period for using chapter 30 MGIB education benefits an additional two years for certain individuals whose delimiting period otherwise would expire before they had used all of their remaining MGIB entitlement.

    Under current law, an individual’s entitlement to education benefits, with certain exceptions, expires at the end of the 10‑ year period beginning on the date of such individual’s last discharge or release from active duty.

    The bill would grant a two‑year delimiting date extension to individuals who have remaining entitlement at the end of their 10‑ year delimiting period and apply for the extension while accepted, enrolled or otherwise participating, as determined by VA, in the following instruction or training: (a) education leading to employment in a high technology industry as described in chapter 30, (b) a full‑time program of apprenticeship or other on‑job training as approved in chapter 36, (c) a cooperative program as defined in chapter 34, (d) a licensing or certification test approved under chapter 36, or (e) SAA‑approved training or education leading to a professional or vocational objective, as identified by VA regulation.

    Individuals eligible to receive an extension of their delimiting dates would be authorized educational and vocational counseling under chapter 36 in connection with the use of the entitlement under this section. However, individuals could not use their entitlement during the two‑year period for general education leading to a standard college degree unless it would result in an associate degree necessary to obtain a professional or vocational objective or for college preparatory courses. Individuals participating in the pilot program could not receive supplemental educational assistance under chapter 30 or a work‑study allowance.

    The pilot program would begin six months after the date of enactment of this section and terminate four years later. Individuals granted the two‑year delimiting date extension during the pilot program would be able to complete that two‑year extension even if the program terminated during the extension.

    Exemption of VA Education Benefits

    The bill contains a VA proposal to exempt VA education benefits provided under chapters 30, 32, 35, and 36 of title 38 and under chapter 1606 of title 10, United States Code, from inclusion as income or assets for the purpose of determining eligibility for, or the amount of, student assistance under any program administered by the Secretary of Education.

    Currently, the Higher Education Act of 1965 (20 U.S.C. S.S.1070 et seq.) requires that VA education benefits be counted as a resource when determining a veteran’s or a beneficiary’s entitlement to certain unsubsidized loans and campus‑based aid.

    We believe strongly that Department of Education benefits should not have the effect of penalizing persons whose VA benefits have been earned through service in our Nation’s Armed Forces. Rather, except for the campus‑based aid programs, those benefits should be made fully available, without reduction, to such VA beneficiaries. A more limited application of this concept is appropriate for campus‑based aid. Under this section, the amount of such aid (determined without considering VA education benefits) together with the VA education benefits and any Federal Pell Grant funds awarded could not exceed the individual’s cost of attendance.

    Mr. Chairman, we appreciate your inclusion of this proposal in your bill and strongly urge its enactment. However, the Department of Education has indicated that this proposal would work best if the legislation amended the Higher Education Act itself. We would be pleased to work with your Committee staff to modify this proposal. Reservists‑MGIB Program

    S. 2486 would require the VA Secretary to collect $1200 from certain Reservists who wish to participate in the chapter 30 MGIB program before such individuals begin to receive educational assistance benefits under that program.

    Title II of S. 2486 and S. 2522‑Housing Benefits

    Title II of S. 2486 would make several amendments to the VA housing loan program authorized by chapter 37 of title 38, United States Code.

    Maximum Loan Guaranty

    Both S. 2486 and S. 2522 would increase the maximum VA housing loan guaranty, which is currently $60,000. S. 2486 proposes to increase the guaranty to $83,425. S. 2522 would index the maximum guaranty to 25 percent of the Federal Home Loan Mortgage Corporation (also known as “Freddie Mac”) single family conforming loan limit. Because the current Freddie Mac conforming limit is $333,700, S. 2522 would also increase the VA guaranty to $83,425. However, under S. 2522, the VA guaranty would be automatically adjusted annually in tandem with the Freddie Mac loan limit.

    Neither the law nor regulations sets a maximum principal amount for a VA guaranteed home loan, so long as the total loan amount does not exceed the reasonable value of the property securing the loan, and the veteran’s present and anticipated income is sufficient to afford the loan payments. As a practical matter, requirements set by secondary market institutions limit the maximum VA loan to four times the guaranty. The current maximum guaranty of $60,000 effectively limits VA housing loans to $240,000. Increasing the maximum guaranty to $83,425 would have the effect of increasing the maximum amount lenders are willing to finance to $333,700. If the guaranty were indexed as proposed by S. 2522, in future years the effective maximum VA loan would remain at the Freddie Mac conforming limit.

    VA is currently reviewing the results of an independent program evaluation of the VA Home Loan program. The maximum home loan guaranty was an element of this evaluation. We support the concept of increasing the guaranty level but reserve our opinion on this proposal until we can complete our analysis of the contractor’s final report.

    VA estimates that increasing the guaranty to $83,425 as proposed by S. 2486 would produce a loan‑subsidy savings to the Veterans Housing Benefit Program Fund of approximately $23.3 million in FY 2005, and a 10‑year savings of approximately $82.4 million. Indexing the guaranty as proposed by S. 2522 would produce similar savings.

    Adjustable Rate Mortgage (ARM) Program

    S. 2486 would revive and make permanent the Adjustable Rate Mortgage (ARM) program authorized by section 3707 of title 38, United States Code. Originally enacted in 1992, section 3707 authorized a 3‑year demonstration program for VA to carry out an ARM program similar to the one administered by the Department of Housing and Urban Development under section 251 of the National Housing Act.

    Due to concerns about the high cost of ARMs, the Congress allowed section 3707 to sunset on September 30, 1995. Similar concerns prevent VA from supporting enactment of this proposal. VA’s past experience was that such ARMs had a 50 percent increased risk of default over fixed‑rate VA guaranteed home loans.

    We estimate that enactment of this provision would increase loan subsidy costs by $4.0 million in Fiscal Year 2005, and have a 10‑ year cost of $261.3 million.

    Hybrid ARM Demonstration Program

    S. 2486 would also make permanent the Hybrid ARM demonstration program authorized by section 3707A of title 38. Unlike traditional ARMs authorized by section 3707, which have an annual interest rate adjustment, Hybrid ARMs bear a fixed rate of interest for an initial period of at least 3 years. Thereafter, the interest rate is adjusted annually.

    The current Hybrid ARM program was authorized for two years and will sunset September 30, 2005. VA only began guaranteeing Hybrid ARMS in the current fiscal year. These loans will not have an interest rate adjustment until late calendar year 2006 or early 2007 at the earliest. We do not believe VA has had sufficient experience to judge the viability of the Hybrid ARM program or assess its performance. Accordingly, we do not favor making this program permanent at this time. Rather, we suggest that the current Hybrid ARM demonstration program be extended by four years, i.e., through Fiscal Year 2009, to allow VA time to assess this new program.

    This bill would modify the rules for interest rate adjustments on VA hybrid ARMs. Under current law, annual adjustments are limited to one percentage point, and the interest rate may never exceed five percentage points above the initial interest rate.

    S. 2486 would limit the initial interest rate adjustment to one percentage point if the interest rate had remained fixed for three or fewer years. The bill would also provide that the maximum interest rate increase over the life of the loan would be set by VA. S. 2486 does not provide for any limit on individual annual interest rate adjustments after the initial one. Although we have no objection to providing more flexibility in interest rate adjustments, we do not favor the language of this proposal as drafted.

    The initial interest rate for VA Hybrid ARMs must remain fixed for at least three years. As a practical matter, virtually no hybrid ARMs have the initial fixed interest rate period of exactly three years. Interest rate adjustments are normally made at the beginning of a month. To ease pooling of loans in the secondary market, it is very likely that VA hybrid ARMs closed by a particular lender over a period of several months would all have the same initial adjustment date. An initial fixed interest rate term such as three years, two months, and 18 days would be common. Therefore, limiting the initial adjustment to one percentage point only if the interest rate was fixed for three or fewer years is virtually meaningless. Further, this section makes no mention of a limit on the initial adjustment if the fixed rate period exceeds three years.

    We also believe the statute should limit the size of annual adjustments, or clearly provide that VA has the authority to set such limits by regulation. We would be pleased to work with your Committee staff to modify this proposal. VA estimates that enactment of this proposal would have a ten‑year cost of approximately $24.8 million.

    Waiver of VA Loan Fee

    S. 2486 would waive collection of the VA loan fee from veterans who are rated as eligible to receive compensation as a result of a pre‑discharge disability examination. Currently, section 3729 of title 38, United States Code, imposes a fee on most persons who obtain or assume a loan guaranteed or made by VA. The fee is waived, however, for veterans who are receiving compensation or who, but for the receipt of retirement pay, would be entitled to compensation, and for surviving spouses of a veteran who died from a service‑connected disability.

    We believe waiving the fee for a veteran or service member who has been rated eligible for compensation but who purchases a home before payment of the benefit has begun is a logical extension of existing law. Therefore, VA supports enactment of this proposal. We estimate the associated costs of its enactment would be insignificant.

    Title III‑Medical and Other Amendments

    Title III of S. 2486 contains a number of amendments to various medical and other program authorities.

    Technical Amendments to Title 5 of the United States Code

    S. 2486 would also make technical amendments to title 5, United States Code, to afford veterans with preference status the right to certain administrative and judicial redress in cases where an agency has allegedly violated their rights under a statute or regulation relating to veterans’ preference. Although in principle we support this proposal inasmuch as it would generally enhance veterans’ employment related rights, we defer to the views of the Office of Personnel Management.

    Co‑payment Exemption for Hospice Care

    S. 2486 would exempt veterans receiving hospice care under VA’s extended care services program from the requirement to agree to pay co‑payments. We support section 311 but recommend that its scope be broadened to include hospice care provided in any treatment setting. Currently, veterans receiving hospice care through the Department may be subject to a co‑payment, which can vary depending upon the type of VA facility or setting in which the care is given.

    Permanent Authority for Sexual Trauma Care and Counseling Program

    This bill would also permanently authorize VA’s sexual trauma care and counseling program. We strongly support this proposal, noting that it is identical to a legislative proposal we submitted to Congress in 2003. Making this particular treatment authority permanent is essential. The number of veterans seeking VA counseling and treatment for military sexual trauma continues to increase. Likewise, the number of women who serve in the Armed Forces, the Reserves, and the National Guard continues to grow. VA must be able to provide needed sexual trauma counseling and related health care to these current and future veterans without any lapse in program authority. We estimate there would be no additional costs associated with enactment of this section.

    Extensions of Certain Reporting Requirements

    S. 2486 would extend through July 1, 2009, the biennial reporting requirement of the Advisory Committee on Former Prisoners of War. It would also extend through December 31, 2009, the reporting requirements of VA’s Special Medical Advisory Group. VA supports these proposals.

    Amendment to VA Definition of Minority Veterans

    Finally, S. 2486 would amend VA’s definition of minority veterans in section 544 of title 38, United States Code, to comport with the Office of Management and Budget’s (OMB) revised Standards for the Classification of Federal Data of Race and Ethnicity (1997). We support this proposal, which is identical to one submitted by the Department last year. The proposal is needed to bring the definitions applicable to minority veterans in line with those used in the Census 2000. The proposed changes would not change minority veterans’ eligibility or entitlement to existing or future benefits.

    S. 2417 Newborn Care

    S. 2417 would authorize VA to provide care to newborn children of women veterans for whom VA furnishes maternity and delivery care. To receive this benefit, the mother must be enrolled in the VA health care system. Currently, VA has no authority to provide care to newborns, although VA provides maternity benefits as part of its medical benefits package.

    We strongly support this bill, which is identical to a legislative proposal we submitted to Congress in 2003. After childbirth, some veterans may need this limited benefit to give them time to apply for medical assistance. Offering this care would also be consistent with the normal pregnancy and delivery coverage in the community. The modest cost of the proposal was included in the President’s Budget submitted earlier this year.

    S. 1153 Prescription Benefit for Medicare Eligible Veterans

    Mr. Chairman, I will next address S. 1153, a bill that you introduced to provide all Medicare‑eligible veterans with a new prescription drug benefit through the VA. As we know, the availability of prescription drugs to our seniors has been an extremely important issue for America, and one that was debated extensively last year by the Congress.

    Your bill would provide Medicare‑eligible veterans with a compensable service‑connected disability this new benefit in addition to the health care benefits they are currently eligible to receive from VA. Those who do not have a compensable service‑ connected disability could choose to receive the new prescription drug benefit in lieu of all other VA health care benefits. The bill would require that these veterans make an irrevocable election of drug or health benefits for each calendar year. The costs for this bill could be defrayed by any combination of annual enrollment fees, co‑payments, and charges for the actual cost of the medication.

    In December 2003, the President signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 to add a prescription drug benefit to Medicare. Starting in 2006, seniors without coverage will be able to join a Medicare‑approved plan that will cut their yearly drug costs roughly in half, in exchange for a monthly premium of about $35. Under this new law, every Medicare beneficiary will be able to choose from at least two drug coverage options, and Medicare‑approved prescription drug plans also will also be able to offer their enrollees supplemental insurance to further enhance their coverage. It is not clear how the expanded VA benefit proposed in S. 1153 would interact with this new Medicare benefit, and we are concerned that this proposal could have significant effects on other public and private health care programs by jeopardizing the current discount prices VA receives on pharmaceuticals. While we appreciate your novel approach and share your concern that veterans and all Americans have access to affordable prescription drugs, we cannot support this bill.

    S. 50 Guaranteed Level of Funding for VHA

    S. 50 would establish, by formula, the annual level of funding for all programs, activities, and functions (except for grants to states for the construction or acquisition of state homes for veterans) of the Veterans Health Administration (VHA) for FY 2005 and fiscal years thereafter. The formula contains detailed terms by which to calculate the requisite annual funding level.

    We recognize the appeal of such an approach. However, it could very well prove to be an unworkable mechanism for funding a dynamic health care system like VA’s.

    As you know, health care evolves continually to reflect advances in state of the art technologies (including pharmaceuticals) and medical practice. It is very difficult to estimate both the costs and savings that may result from such changes. Moreover, patients’ health status, demographics, and usage rates are all subject to variable trends that are difficult to predict. A formula, such as that proposed in S. 50, could not take changes in such trends into account. As such, there is no certainty that the funding dictated by the proposed formula would be adequate or appropriate to meet the demands that will be placed on VA’s health care system in the upcoming years.

    Moreover, if the demand for care that such an approach creates would overwhelm VA’s capacity to provide care in‑house, we could transform into more of a payer than provider of veterans’ health care. That would not bode well for our long‑term prospects of remaining an independent system uniquely capable and structured to respond to the specialized needs of veterans of military service.

    Use of an automatic funding mechanism would also diminish the valuable opportunity that members of the Congress and the Executive Branch now have to identify and directly address the health care needs of veterans through the funding process. It may also diminish the Department’s strong incentive to improve program operations and efficiency.

    Finally, references to “guaranteed funding” may give the public the false impression that VA would be fully funded to enroll all veterans and to furnish care for all their needs. We do not believe this proposal would ensure open enrollment. VA would still be required to make an annual enrollment decision, and that decision would directly affect the number of enrolled veterans and thus the amount of funding calculated under the formula.

    Be assured we share the desire by many in Congress to ensure stable funding for VA’s health care system. However, until there is a more complete understanding of all consequences that could flow from this approach, both intended and unintended, we are unable to lend our support.

    S. 2327 State Home Per Diem Payment ‑Relation to Medicaid

    For many years, a number of State homes have accepted both VA per diem payments for the care of veterans and Medicaid payments for those veterans without reducing the Medicaid payments by the amount of per diem payments. The Department of Health and Human Services (HHS) has determined that this practice violates its rules and is investigating whether to seek reimbursement. S. 2327 appears aimed at rectifying this situation by deeming that VA state home per diem payments “shall not be considered a liability of a third party, or otherwise be utilized to offset or reduce any other payment made to assist veterans.” Because this bill would primarily impact the Medicaid program, we defer to the views of HHS on the matter.

    S. 1014 Changes to VERA allocations

    S. 1014 would amend the Department’s statutory enrollment system by creating two groups within enrollment priority category (5). The first group would be those veterans currently in category (5), veterans whose income falls below VA’s national “means test” income threshold. The second group would include those veterans currently in priority category (7), veterans whose incomes are above VA’s national “means test” level but below VA’s geographic “means test” threshold. The second group would remain subject to co‑payment requirements that currently apply to veterans in priority category (7). Finally, the bill would also re‑designate priority category (8) as priority category (7).

    We understand that the bill’s sponsors introduced this measure to ensure that VA facilities in locations with a high cost of living receive an appropriate level of funding under VA’s Veterans Equitable Resource Allocation System (VERA). When the sponsors introduced the bill over a year ago, the VERA system allocated funds to VISNs based upon the number of veterans treated in the facility who were in VA enrollment priority categories (1‑6), and did not allocate basic care funds for those veterans in priority categories (7) and (8). The sponsors may believe that facilities located in high‑cost areas of the country tend to treat a greater number of category (7) enrollees than do facilities in lower‑cost areas because veterans in the former locations generally have higher incomes. Priority category (7) takes into account the cost‑ of‑living by use of a geographic “means test” that varies depending on the cost‑of‑living in each geographic area. Because the VERA system was not providing basic care funding for priority category (7) veterans, the sponsors apparently believed high‑cost areas of the country receive less funding than needed when compared to lower‑cost areas of the country. To rectify that perceived problem, S. 1014 would combine the current category (5) with category (7), thereby ensuring that the VERA allocation system provides funding for all veterans with income below a geographically adjusted means test.

    S. 1014 is unnecessary and we oppose its enactment. Since the introduction of the bill, VA has changed the VERA allocation system to provide funding for both priority category (7) veterans and category (8) veterans, completely negating any need for this legislation. The VERA model also takes into consideration the actual costs for providing care to those in categories (7) and (8), as well as categories (1) through (6), and provides funding accordingly. S. 2063 Access to Care Demonstration Project

    S. 2063 would require VA to carry out a two‑year demonstration project to study the feasibility and advisability of requiring VA to schedule appointments within specified time frames and take into consideration whether a veteran has a service‑connected disability rated at least 50 percent, or is receiving care for a service‑connected disability. In 2000, VA established a goal ‑ referred to as the 30‑30‑20 ‑ under which veterans would be able to schedule initial non‑urgent primary care appointments and non‑ urgent appointments with a specialist with 30 days, and would be seen within 20 minutes of their appointment times. The demonstration project would require VA to meet this goal in three Veterans Integrated Service Networks (VISNS) ‑ one urban, one rural, and one highly rural. Veterans covered by the project would include any veteran residing in the covered network. Under the project, each appointment would be scheduled in a VA facility unless the cost of doing so exceeds the cost of scheduling in a non‑Department facility to an unreasonable degree, or unless scheduling in a non‑VA facility is required for medical or other reasons, in which event VA would have to contract for the care. The bill also includes an annual reporting requirement on the waiting times of veterans for appointments. Information regarding the demonstration would be included in the 2007 annual report.

    We strongly oppose S. 2063. It has the potential to dramatically increase demand for VA care and overwhelm our ability to provide care in VA facilities participating in the demonstration project.

    In 2000, our goal was to achieve a national average waiting time of 30 days or less for both primary care and specialty clinics. The current May 2004 data reveal that 95.7% of appointments for primary care were within 30 days and 94.2% of appointments for specialty care were within 30 days of the desired date. At this time, however, we do not believe any of our VISNs would be able to comply with the 30‑day standard for all appointments that would be required under the demonstration project. Thus, if the bill were enacted, every VA facility in the covered networks would be forced to offer any veteran desiring a primary care visit the opportunity to receive that care in the private sector on a contractual basis if VA cannot provide the care in a VA facility within the mandated time‑frame. Providing contract care for all veterans waiting 30 days or more for an appointment would be more expensive than providing that care in VA facilities. We believe that huge numbers of veterans who now choose to receive their primary care in the private sector would likely avail themselves of this new benefit in the demonstration sites. This enhanced demand would have the effect of draining appropriated funds out of VA‑operated facilities to pay for contract care. These additional costs would threaten our ability to provide services to our core constituency ‑ service‑connected and indigent veterans.

    Mr. Chairman, the appointment goals set in 2000 included a goal of increasing the percentage of veterans who report seeing a provider within 20 minutes to 78% over the three years, and to 82% over six years. By referencing this strategic goal, the bill appears to direct that we create a standard for the length of time a veteran would have to wait to see a provider on the day an appointment is scheduled, and require contracting for care when we are unable to comply with the standard. The rationale for this is unclear. Unanticipated delays while waiting to see the provider are commonplace in the health care arena. For example, if a provider is unexpectedly delayed while treating a patient with an earlier appointment, or while responding to an emergency, another patient may have to wait 40 minutes instead of 20 minutes. We would not ordinarily turn a patient away or reschedule the appointment time on the basis of such an unanticipated delay. It is not clear how this day‑of‑service standard would or could be implemented or satisfactorily monitored in a demonstration project. Waiting times on the day of appointment are better addressed through performance measures than through a standard arbitrarily designated in law or regulation.

    We would encounter several additional problems implementing the demonstration project. These would include difficult issues with patient medical records caused by the fragmentation of care between VA and the private sector, and problems associated with having the non‑VA providers access VA patient records and make referrals. Implementation would compromise the continuity of care for a vulnerable veteran population, and create problems coordinating ancillary follow‑up care. The bill also assumes that needed care can be obtained in the community within 30 days; however, there are shortages in certain specialty care areas in the private sector that mirror VA’s difficulty in hiring. Further, some geographic areas do not have certain specialty providers, while in other areas the available specialists are already under contract with VA. The bill sets a 30‑day time frame for receiving a primary or specialty appointment and provides no flexibility or latitude for patient or provider preference in determining when an appointment is needed. It is more appropriate to use the patient or provider’s desired appointment date for determining whether time frame goals are met.

    As you know, VA has, in recent years, faced unprecedented new demand for services, and has been forced to place many veterans on wait lists. However, we have made remarkable progress in reducing the number of veterans on the wait list and improving waiting times. This is in part attributable to our emphasis on performance measures, the Advanced Clinic Access initiative and redirecting resources to hire additional providers. VHA will continue employing these strategies.

    VA has established strategic goals to achieve the level of timeliness indicated in the bill, and we have implemented strategies to reach those goals. Enacting the demonstration project proposed in S. 2063 would make achievement of those goals more difficult.

    S. 1509 Payment of a Monetary Benefit to Persons who Contract HIV or AIDS from a Transfusion

    S. 1509 would provide a $100,000 gratuity to veterans, their spouses, and their children who contract HIV or AIDS following a blood transfusion or organ transplant received in treatment of a service‑connected disability. The gratuity would be available to individuals who can provide medical evidence acceptable to the Secretary of Veterans Affairs indicating a reasonable certainty that the transmission of HIV resulted from such treatment. The bill would provide that, if an individual entitled to the gratuity is deceased at the time of payment, payment will be made to the individual’s survivors. The survivors of an eligible individual who dies before applying for the gratuity may apply on behalf of the deceased individual, and the deceased individual’s gratuity may then be paid to the survivors in the same manner as if the deceased individual had applied for the gratuity and died before payment was made.

    There are already mechanisms in place under title 38, United States Code, for provision of disability compensation to veterans who suffer disabilities as a result of contracting HIV or AIDS from VA treatment for a service‑connected disability and dependency and indemnity compensation to the survivors of such veterans. Further, VA currently pays additional compensation to service‑disabled veterans whose spouses require regular aid and attendance. Such benefits could be payable to veterans whose spouses contract AIDS through contact with the veteran. Also under current law, if the Government is responsible for transmission of HIV through its negligence, the Federal Tort Claims Act provides an available remedy for injured veterans, family members, and survivors. State law affords similar remedies against non‑VA providers. The availability of these remedies renders unnecessary the relief contemplated by this bill. Also, the bill contains no provision for offset of the contemplated gratuity against any compensation or award received under title 38 or the Federal Tort Claims Act for the same injury. Thus, the bill would result in duplicate payments for the same harm.

    Further, S. 1509 would result in inequitable treatment of similarly situated veterans. Veterans who contract hepatitis or other blood‑borne illness as a result of treatment for service‑ connected disability would be ineligible for the gratuity. Such veterans would seem to be equally deserving of compensation as those who contract HIV or AIDS.

    Moreover, VA would be required to pay the gratuity even if a private health‑care provider were responsible for the transfusion of tainted blood. The Federal Government generally should not assume responsibility for harm caused by private entities.

    For all of these reasons, we cannot support enactment of S. 1509.

    VA lacks the information needed to develop a reasonable estimate of the cost of this legislation.

    S. 1745 Prisoner of War/Missing in Action National Memorial Act

    S. 1745 would designate the memorial to former prisoners of war (POW) and members of the Armed Forces listed as missing in action to be constructed at the Riverside National Cemetery in Riverside, California, as the Prisoner of War/Missing in Action National Memorial. It would also prescribe that the national memorial is not a unit of the National Park System and that the designation of the memorial shall not be construed to require or permit Federal funds, other than any funds provided for as of the date of enactment of the bill, to be expended for any purpose related to the memorial.

    The memorial will be comprised of a circular plaza located on the east side of the upper lake just inside the entrance to the national cemetery. The centerpiece of the memorial will be a figurative bronze statue of a Vietnam POW. Black granite panels standing on end will be placed to the rear of the circular plaza. The names of all known POW sites, including the total number of prisoners at each location, will be engraved on these panels. The POW sites will be displayed by major conflict or campaign.

    The Riverside National Cemetery Memorials and Monuments Commission (Commission) is a private organization that has proposed to erect the memorial and donate it to the National Cemetery Administration (NCA). The Commission is responsible for funding and contracting issues related to this project. The Commission is currently raising funds for the construction and future maintenance of the memorial through donations. The statue for the memorial is finished and is ready for installation once the plaza is completed. NCA approved plans for the project in March 2004 and designated a location for the memorial within cemetery grounds. The Commission anticipates that construction of the plaza will commence this summer and plans to dedicate the memorial six months after construction begins.

    The National Park Service (NPS) currently maintains and operates the National POW Museum located at the Andersonville National Historic Site in the State of Georgia. In 1970, Congress authorized the establishment of the Andersonville National Historic Site pursuant to Public Law 91‑465, 84 Stat. 989, in order to “provide an understanding of the overall prisoner‑of‑ war story of the Civil War, to interpret the role of prisoner‑of‑ war camps in history, to commemorate the sacrifice of Americans who lost their lives in such camps, and to preserve the monuments located therein.” The park and the National POW Museum currently serve as a national memorial to all American POWs. Accordingly, we recommend that NPS have an opportunity to comment on this legislation.

    We have no objection to designation of a national memorial at Riverside National Cemetery, and we estimate that there would be no costs to VA associated with designation of the memorial. However, we are concerned that the bill would restrict use of Federal funds to maintain the memorial in the event that private funds are not adequate for this purpose. It would also apparently preclude VA from expending any Federal funds for future maintenance of the memorial under any circumstances. Although the Commission is raising funds to cover the future costs to operate and maintain the memorial, should the donating organization become unable to meet the future costs associated with maintenance and repair of the memorial, VA would be prohibited from using Federal funds to provide such maintenance or repairs.

    Without authority to use Federal funds for the care and maintenance of the memorial, we do not support this legislation.

    S. 2099 Selected Reservists Entitled to Montgomery GI Bill Benefits

    S. 2099 would entitle Selected Reservists who, on or after September 11, 2001, serve on active duty in the Armed Forces for not less than two years in any five‑year period, and who meet the other eligibility criteria, to basic educational assistance under the chapter 30 Montgomery GI Bill program. The two‑year period required for eligibility would not have to be continuous service, but could be an aggregate of one or more periods of service. These MGIB participants would receive one month of educational assistance benefits for each month of active duty served after September 11, 2001, as part of the two‑year eligibility criteria. The amount of the benefit paid would be the same as that of an individual whose entitlement is based on an obligated active duty period of two years, currently $800 monthly for a program of education pursued on a full‑time basis. The Secretaries of the various military components of the Armed Forces are charged with informing Selected Reservists of the availability of the benefits provided by this bill.

    Mr. Chairman, the Department has already implemented provisions of chapter 30 MGIB education benefits in a manner that recognizes benefits for Reservists called or ordered to active duty and who serve a continuous period of active duty aggregating two years or more, provided they otherwise meet the MGIB eligibility criteria. However, we do not yet have a cleared position or cost estimate on this specific proposal, but will supply those to the Committee as soon as possible.

    S. 2296 Option for Commonwealth of Kentucky for Certain Property

    Mr. Chairman, S. 2296 would grant the Commonwealth of Kentucky a first option should the VA decide to convey, lease or otherwise dispose of the Louisville, KY Veterans Affairs Medical Center. This bill would require the VA to negotiate with the Commonwealth of Kentucky and restrict for one year the Department from negotiating with any other party.

    Let me note first of all that because VA does not presently have direct disposal authority, we do not currently have the authority to negotiate with the Commonwealth. However, as discussed earlier in my statement, we do support being given such disposal authority. Having said that, we, nonetheless, oppose this legislation because we believe it could prevent VA from achieving maximum value from disposal of the property should the property no longer be needed by VA. Achieving best value in a property transaction involves market timing and competition, and this proposal would remove both of these considerations.

    S. 2133 Designation of Bronx VAMC

    This bill would designate the Bronx VAMC as the “James J. Peters Department of Veterans Affairs Medical Center.” We defer to Congress in the naming of federal property.

    Veterans Programs Improvement Act of 2004

    Mr. Chairman, we also request the Committee’s favorable consideration of a draft bill we submitted only very recently. In addition to providing for a compensation COLA (identical to that in your bill, S. 2483) it would:

    * extend full‑time and family Servicemembers’ Group Life Insurance coverage to certain additional reservists;

    * authorize VA to provide memorial headstones or markers when the remains of veterans’ minor children are unavailable for burial in state or national veterans cemeteries;

    * authorize use of chapter 34 and chapter 35 benefits to defray the costs of certain high‑tech courses; and

    * allow eligible veterans who are employable, but are determined to be in need of chapter 31 employment services only, to receive Vocational Rehabilitation Employment Adjustment Allowances.

    Other Bills

    Mr. Chairman, we do not yet have cleared positions or cost estimates on S. 2524, a proposal to establish a War‑Related Blast Injury Center, or S. 2534, a bill to improve veterans education and housing benefits. We will supply those for the record.

    This concludes my prepared statement. I would be pleased to answer any questions you or any of the members of the Committee may have.

VA Home | Privacy | FOIA | Regulations | Web Policies | No FEAR Act | Site Index | USA.gov | White House | National Resource Directory | Inspector General

U.S. Department of Veterans Affairs - 810 Vermont Avenue, NW - Washington, DC 20420