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Submission For The Record of Fred S. Sganga, President, National Association of State Veterans Homes

I. Overview

The National Association of State Veterans Homes (“NASVH”) appreciates the opportunity to submit this statement on H.R. 2530, sponsored by Mr. Michaud and Chairman Miller. The bill will provide for increased flexibility in establishing rates of reimbursement for State Veterans Homes by the Secretary of Veterans Affairs for nursing home care provided to service-connected disabled veterans. The text of H.R. 2530 is identical to legislative language approved by the Senate Committee on Veterans’ Affairs on June 29, 2011, as section 109 of S. 914.

H.R. 2530 is intended to remedy the consequences of the implementation of section 211(a) of the Veterans Benefits, Health Care, and Information Technology Act of 2006 (Pub. L. No. 109-461) (the “2006 Act”). Section 211(a) of the 2006 Act established new payment mechanisms by the VA for the long-term care of service-connected disabled veterans at State Veterans Homes (the “70 Percent Program”). NASVH believes that the 70 Percent Program must be remedied promptly by legislation. Continuation of the 70 Percent Program in its current form will not only inhibit the long-term care of service-connected disabled veterans, but will also threaten the financial viability of many of the Nation’s State Veterans Homes.

NASVH’s membership consists of the administrators and staff of State-operated Veterans Homes throughout the United States and in the Commonwealth of Puerto Rico. NASVH members currently operate 142 Veterans Homes in all 50 States and Puerto Rico. Our nursing homes provide over 29,000 nursing home and domiciliary beds for veterans and their spouses, and for the gold-star parents of veterans. Our nursing homes assist the VA by providing long-term care services for approximately 53 percent of the VA’s long-term care workload at the very reasonable cost of only about 12 percent of the VA’s long-term care budget. On average, the daily cost of care of a veteran at a State Veterans Home is less than 50 percent of the cost of care at a VA long-term care facility.

Particularly in these times of tight federal budgets and deficit reduction imperatives, the national State Veterans Home system is an economical alternative to other VA long-term care programs. In fact, a report by the VA’s Office of Inspector General stated:

A growing portion of the aging and infirm veteran population requires domiciliary and nursing home care. The SVH [State Veterans Home] option has become increasingly necessary in the era of VAMC [VA Medical Center] downsizing and the increasing need to discharge long-term care patients to community based facilities. VA’s contribution to SVH per diem rates, which does not exceed 50 percent of the cost to treat patients, is significantly less than the cost of care in VA and community facilities.

II. Inadequacies of the Current 70 Percent Program

Implementation of the 70 Percent Program has created very serious unintended consequences for State Veterans Homes throughout the country. The 70 Percent Program authorized payment of different per diem amounts by the VA to State Veterans Homes which provide nursing home care to veterans with service-connected disabilities. Although the 2006 Act creating the 70 Percent Program became effective on March 31, 2007, the VA did not issue regulations to implement the 70 Percent Program until April 29, 2009, and problems arose immediately with its implementation. Since that time, NASVH has met repeatedly with VA officials in an attempt to modify the 70 Percent Program administratively to solve these problems, but both NASVH and the VA now agree that some of the problems with the 70 Percent Program can only be solved fully by a modification of the law.

The problems with the 70 Percent Program are as follows. Although VA regulations implementing the 70 Percent Program state that the Program provides a “higher per diem rate” for veterans with service-connected disabilities, the regulations actually result in significantly lower total amounts being paid to many State Veterans Homes providing “skilled nursing care” to veterans with service-connected disabilities. In fact, the 70 Percent Program, in its current form, substantially underpays State Veterans Homes for “skilled nursing care,” and pays State Veterans Homes only about 1/2 to 2/3 of what Medicare previously paid to State Veterans Homes for the same care of the same veterans, and only about 1/3 to 1/2 of what the VA currently pays itself for the same care of the same veterans with service-connected disabilities.

“Skilled nursing care” is relatively common nursing care that involves significant amounts of rehabilitative services such as physical therapy, occupational therapy, speech therapy, expensive pharmaceuticals, and specialty medical services that often are not easily accessible at a nearby VA Medical Center by a State Veterans Home. As implemented, the 70 Percent Program does not provide to many State Veterans Homes their total cost of “skilled nursing care” for service-connected disabled veterans, despite congressional intent. This is a problem largely for those 34 States that have Medicare-certified State Veterans Homes and that provide a substantial amount of skilled nursing care to veterans with service-connected disabilities.  The number of States that have Medicare-certified State Veterans Homes that provide “skilled nursing care” is steadily increasing.

 The 70 Percent Program’s inadequate reimbursement levels have caused many State Veterans Homes that provide a substantial amount of skilled nursing care to veterans simply not to admit veterans to their State Veterans Homes under the 70 Percent Program, to limit the numbers of such admissions, or to admit veterans under the 70 Percent Program without restriction and expose themselves to substantial financial losses.  This is exactly the opposite result sought by Congress when it passed the 2006 Act. In short, although the current 70 Percent Program is workable for some State Veterans Homes which provide largely non-skilled nursing care to veterans with service-connected disabilities, it causes substantial problems for an increasing majority of States in the Nation which provide substantial amounts of skilled nursing care to such veterans in State Veterans Homes. As such, the 70 Percent Program is not achieving its central intended purposes, and it must be corrected.

In addition, because of a quirk in the existing 70 Percent Program law, almost no State Veterans Home in the Nation actually is paid the “higher” prevailing per diem rate established by the VA for the 70 Percent Program. This is so because a combination of 38 U.S.C. §1745 and the VA regulations implementing §1745 require that State Veterans Homes be paid only “the lesser of” the per diem rate established by the VA for the 70 Percent Program or a rate determined under OMB Form A-87. The OMB Form A-87 rate is almost always significantly less than the prevailing per diem rate published by the VA for the 70 Percent Program, and this has caused an additional financial hardship for State Veterans Homes.

Lastly, the most regrettable unintended consequence of the 70 Percent Program is that, for service-connected disabled veterans, it unnecessarily replaced a program (under 38 U.S.C. § 1741) that had worked well for decades for the States that have Medicare-certified State Veterans Homes with a program (under 38 U.S.C. § 1745) that has a multitude of regulatory and financial problems.

III. The Remedy Proposed by H.R. 2530

NASVH has been working with the VA since the 70 Percent Program regulations were implemented in 2009 to resolve these difficulties.  Although reluctant to overhaul the program initially, the VA now has recognized the need for substantial changes.  The VA transferred administrative responsibility for the financial aspects of the 70 Percent Program from the VA Office of Geriatrics and Extended Care to the VA Chief Business Office. NASVH has met several times with senior officials at the Chief Business Office and we are confident that they are sincerely trying to solve the problems of the 70 Percent program.

Most recently, the VA and its Chief Business Office have proposed to amend the current 70 Percent Program statutory language under 38 U.S.C. § 1745 to authorize the VA to enter into direct contracts with State Veterans Homes under 38 U.S.C. § 1720 that could adequately and accurately reimburse State Veterans Homes for providing long-term care to 70 Percent Program veterans. This is, in essence, the remedy proposed by H.R. 2530. However, this solution will work effectively only if it is implemented fairly by the VA, taking into account the following considerations.

First, as stated above, NASVH is working with the VA Chief Business Office to develop adequate and accurate reimbursement measures for the long-term care of 70 Percent Program veterans. The most equitable approach appears to be to establish that payments by the VA for basic long-term care under section 1720 contracts be comparable to the existing “higher” prevailing per diem rate established by 38 U.S.C. § 1745. This is a mechanism that will work effectively to reimburse State Veterans Homes for the basic nursing care of service-connected disabled veterans.

Second, any payment program implemented by the VA should require that payments by the VA for “outlier” specialty medical services and drugs provided to veterans by State Veterans Homes under a section 1720 contract be made at rates and under eligibility criteria comparable to those used by Medicare. Rather than leave the determination of the reimbursement levels for such services provided to service-connected disabled veterans to the whims or annual changes in VA policy or personnel, Medicare payment levels and eligibility criteria can serve as constant and fair guidance for any VA program to reimburse State Veterans Homes for “outlier”  specialty medical services and drugs under section 1720 contracts for the long-term care of service-connected disabled veterans. 

Third, we emphasize that a contract is a two-sided instrument. Both sides must agree for a contract to exist. The ability of a State Veterans Home to enter into a contract with the VA for the long-term care of a service-connected disabled veteran means necessarily that a State Veterans Home also has the option not to enter into such a contract, if the State Veterans Home believes that the reimbursement terms offered by the VA for the care of such a veteran are not adequate. In short, the VA will succeed in having State Veterans Homes provide significant amounts of nursing home care to service-connected disable veterans only if the VA pays State Veterans Homes adequately for such care.

Lastly, it is important for the Subcommittee to realize that the enactment of the above provisions should not cost the Federal government anything additional and should, in fact, save the Federal government substantial amounts of money. This is so because of the simple fact that enactment of the Bill’s proposals described above will encourage more service-connected disabled veterans to receive long-term care at State Veterans Homes rather than at VA long-term care facilities, and State Veterans Homes cost far less on a per veteran per day basis than VA long-term care facilities.

The cost differences are dramatic. The average cost per veteran per day at a VA long-term care facility is $944.25 (VA, Volume II, Medical Programs and Information Technology Programs, Congressional Submission, FY 2012 Funding and FY 2013 Advance Appropriations Request, page 1H-19). Assuming enactment of the proposals described above, the average cost per veteran per day at a State Veterans Home, including basic care, drugs, and outlier specialty costs is not likely to exceed $450.00 per day. Accordingly, every service-connected disabled veteran that receives long-term care at a State Veterans Home rather than at a VA long-term care facility will save the Federal government over $494 per day, or $180,310 per veteran per year.

Nationally, there are 24,422 State Veterans Home nursing facility beds that could be occupied by 70 Percent Program veterans. On the average, 13 percent of these beds, or almost 3,175 beds, are unoccupied. Approximately 2,000 additional State Veterans Home nursing facility beds that could be occupied by 70 Percent Program veterans are under construction. Accordingly, if State Veterans Homes were to fill only their currently vacant beds with 70 Percent Program veterans, the Federal government would save approximately $5.7 billion over 10 years. If only half of the vacant State Veterans Home long-term care beds were filled by 70 Percent Program veterans instead of such veterans receiving long-term care services at VA long-term care facilities, the Federal government would save $2.8 billion over 10 years.

Currently, however, many State Veterans Homes, especially those providing “skilled nursing care,” are discouraging the admission of service-connected disabled veterans to their facilities because the payment structure under the current 70 Percent Program is so inadequate. The solution to this is to pay State Veterans Homes adequately and accurately to care for service-connected disabled veterans. State Veterans Homes cost far less on a per veteran per day basis than VA long-term care facilities. The VA should fully utilize a less-costly resource (State Veterans Homes) before using a more-costly resource (VA long-term care facilities). It is simply good business, and good veterans health care policy, for the Chief Business Office of the VA to seek to reimburse State Veterans Homes adequately for the long-term care of service-connected disabled veterans.

NASVH thanks the Subcommittee for its continuing efforts to solve this important problem, and we encourage the Members of the Subcommittee to favorably report H.R. 2530.  We look forward to continuing to work with the VA and Congress to resolve these issues promptly so that we can better serve our Nation’s veterans.