Chairman Michaud, Ranking Member Brown, and members of the Subcommittee, Paralyzed Veterans of America (PVA) would like to thank you for the opportunity to submit our views on H.R. 4241, to allow for increased flexibility in payments for State veterans homes.  This subject is covered in depth in the recently released version of The Independent Budget regarding the funding requirements for the VA health care system for FY 2011.

PVA generally supports H.R. 4241 to allow for increased flexibility in payments for State veterans homes, but believes greater understanding of the problem is needed.

The Department of Veterans Affairs (VA) State Veterans Home Program currently encompasses 137 nursing homes in 50 States and Puerto Rico, with more than 28,000 nursing home and domiciliary beds for veterans and their dependents. State veterans homes provide the bulk of institutional long-term care to the nation’s veterans. The GAO has reported that State homes provide 52 percent of VA’s overall patient workload in nursing homes, while consuming just 12 percent of VA’s long-term care budget.  VA’s authorized ADC for State veterans homes was 19,208 for FY 2008.

VA holds State homes to the same standards applied to the nursing home care units it operates. State homes are inspected annually by teams of VA examiners, and VA’s Office of Inspector General (OIG) also audits and inspects them when determined necessary. State homes that are authorized to receive Medicaid and Medicare payments also are subject to unannounced inspections by the CMS and announced and unannounced inspections by the OIG of the Department of Health and Human Services.

VA pays a small per diem for each veteran residing in a State home, currently at a rate of $77.53 per day.  This is less than one-third of the average cost of that veteran’s care. The remaining two-thirds is made up of a mix of funding, including State support, Medicaid, Medicare, and other public and private sources.  In contrast, VA pays Community Nursing Homes over $200 per day with the cost of care in VA Community Living Centers (VACLC) at almost $800 per day.

Service-connected veterans should be the top priority for admission to State veterans homes, but traditionally they have not considered State homes an option for nursing home services because of lack of VA financial support. To remedy this disincentive, Congress provided authority for full VA payment.

Unfortunately, veterans with severe disabilities may be put at a disadvantage in gaining access to State veterans homes.  As part of P.L. 109-461, the “Veterans Benefits, Health Care, and Information Technology Act of 2006,” Congress approved payment of different per diem amounts by VA to State veterans homes which provide nursing home care to veterans with service-connected disabilities, a program dubbed “the 70 Percent Program.”  VA issued regulations for this program in April 2009 and granted a higher per diem rate for veterans with service-connected disabilities.  Unfortunately, PVA is hearing reports that these rates have resulted in lower payments to many State veterans homes and in some cases are less than the actual cost of care.

PVA believes VA made a good faith effort in establishing the original rates, but may not have taken into consideration the significantly greater cost of care for those with severe disabilities, in particular those service connected veterans with 70 percent or greater ratings.  As a result, we are concerned that many severely disabled veterans who would choose to use the State veterans homes will be denied access simply because the veterans home can not afford the cost of their care.  This will cause a significant impact on our veterans most in need at a time when VA is continuing to reduce their capacity to provide long-term care facilities.

PVA has been informed by representatives of the National Association of State Veterans Homes (NASVH) that VA seems resistant to modifications of the per diem rate or alternatives that may provide greater reimbursement rates.  There is a sense that the VA believes the lower rate is appropriate because VA shoulders a great financial burden when it helps cover the cost of construction, rehabilitation, and repair of State veterans homes, providing up to 65 percent of the cost, with the State providing at least 35 percent.  If true, PVA believes this argument is invalid.

In FY 2007 the construction grant program was funded at only $85 million, the same amount Congress had provided in FY 2006. Based on a current backlog of nearly $1 billion in grant proposals, and with thousands of veterans on waiting lists for State beds, The Independent Budget for FY 2008 recommended no less than $150 million for this program and Congress responded with $165 million for FY 2008 in the Omnibus Appropriations Act. For FY 2009, the IB recommended $200 million for the State veterans home construction grant program, and Congress provided $175 million. Also in FY 2009 Congress provided State home construction $100 million in the Stimulus Act, giving VA a total of $265 million in availability for its construction grant program. For FY 2011, The Independent Budget recommends the construction grant program be funded at $275 million.

The VA is using this grant program as an incentive to build more capacity to avoid the greater cost of building it themselves.  PVA firmly believes that construction costs should not be mixed with healthcare costs.  The per diem rate should be independent of any quid pro quo VA may believe exists with the State veterans homes due to construction funding.  State veterans homes can provide high quality care at a rate cheaper than VA and should be rewarded for doing so, not punished.

Mr. Chairman, PVA believes H.R. 4241 may help remedy this problem.  But we believe the Subcommittee should go further.  Currently there is only anecdotal information on perceived widespread, but individual, challenges facing State veterans homes due to this problem.  With the challenges facing future VA budgets, abstract information is insufficient to make the critical decisions needed to support our veterans.  PVA would recommend a study to determine what impact these funding shortfalls are having on State veterans homes.  Also, due to the immediate impact of these financial shortfalls, we believe this report should be completed as soon as possible, but no later than September 30, 2010.  As the report is being conducted, one option might be for VA to raise their reimbursement rate to State veterans homes to be commensurate with the rate paid to Community Nursing Homes for similar services for 70 percent and greater service-connected disabled veterans.

VA and Congress must continue to provide the construction grant and per diem funding necessary to support State veterans homes. Even though Congress has approved full long-term care funding for certain service connected veterans in State veterans homes, under P.L. 109-461 it must continue to provide resources to support other veteran residents in these facilities and to maintain the infrastructure. To that end, Congress should provide State veterans homes $275 million in construction grant funds for FY 2011.

PVA would like to thank this Subcommittee for the opportunity to express our views relating to these important benefits for veterans.  We look forward to working with this committee as they continue addressing the issues that effect America’s veterans.