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Witness Testimony of Adrian Atizado, Disabled American Veterans, Assistant National Legislative Director

Mr. Chairman and other Members of the Committee—

Thank you for inviting the Disabled American Veterans (DAV) to testify today.  DAV is an organization of 1.4 million service-disabled veterans, and along with our auxiliary, we devote our energies to rebuilding the lives of disabled veterans and their families.  Thank for you for scheduling this hearing to consider current policy of the Department of Veterans Affairs (VA) for Priority Group 8 (PG8) veterans.  New veterans who seek access to VA health care and fall into this category are presently barred from enrollment in the VA health care system. 

DAV is an organization that advocates beneficial federal policy and legislation on behalf of 2.6 million American veterans who were wounded or made ill during wartime service.  Given our focus on the service-disabled veteran population—veterans who are guaranteed by law high-priority access to VA, it would seem natural to ask why DAV would be concerned about the absence in VA health care of non-service connected veterans with incomes above the geographically adjusted means test threshold.  DAV, along with the other veterans service organizations making up the Independent Budget, has supported reentry of PG8 veterans because we believe that to be a viable health care system, VA needs a wide range of patients, including those who are physically well and want to maintain their good health, those with acute and chronic illnesses, and veterans with catastrophic health care problems who need highly specialized services.  When VA manages a proper mix of patients, it offers a better health care plan to all patients and is a more attractive place of employment for clinical and health professions, educational, and research professional staff.  For DAV, a better system for all veterans’ care means a better system for service-disabled veterans.

Mr. Chairman, while DAV opposed the decision taken by then-Secretary of Veterans Affairs Anthony J. Principi to close further PG8 enrollments on January 17, 2003, we were not surprised by that decision.  As Secretary Principi himself stated publicly, VA faced “the perfect storm,” with insufficient funding and overwhelming demand.  Going back to that time, VA was under a tremendous workload strain, with eventually more than 300,000 enrolled veterans waiting more than six months for their initial primary care appointments, and with all enrolled veterans’ care being rationed.  We understood then and now the reason for this decision—clearly, VA was suffering from severe under-funding across its health care programs.  The run-up to that decision by Secretary Principi also fueled our determination at DAV to seek legislation reforming VA’s health care budget formulation and discretionary appropriations process.  The system in place then and now does not fund known and expected needs and remains subject to political manipulation, the imposition of gimmicks and questionable policy proposals.  To address these issues the then-Chairman of this Committee, the Honorable Christopher H. Smith, introduced legislation (H.R. 5250) in the 107th Congress; in the 108th and 109th Congresses the then-Ranking Member, the Honorable Lane Evans, introduced similar bills, H.R. 2318 and H.R. 515, respectively.  No Congressional actions were taken on those bills. 

Enactment of these proposals would have established certainty of VA health care funding through the application of a defined formula based on the actual cost of care and the actual number of veterans under VA care, with a built-in inflation adjustment.  Under these bills, the Administration and Congress would retain their executive and oversight responsibilities as under current law.  While we supported these bills in part because of our desire that PG8 veterans be readmitted to the system, the PG8 issue is only a symptom of the larger problem and not the source of the problem itself.  Obviously, even with the exclusion of the PG8 veterans, now numbering more than one million veterans, those budget and appropriations conditions continue to exist today.  We at DAV remain hopeful that funding reforms will eventually permit reentry of PG8 veterans to VA health care. 

Mr. Chairman, when Congress authorized the Veterans Health Care Eligibility Reform Act of 1996, Public Law 104-262, it did so fully cognizant that employed veterans with higher incomes and workplace-based health insurance—most being classified in the current PG8 category—would enroll in VA health care, and that their costs as consumers of VA health care would be offset or significantly subsidized by first- or third-party insurance collections.  The primary objective of the Act was dissolving the irrational eligibility system in place before, that prevented some veterans, even service-disabled veterans, from receiving holistic care by VA, particularly in the outpatient setting.  Also, the act eliminated a tangled web of rules and internal VA policies that made health care eligibility decisions bureaucratic, complicated, confusing, and harmful to the health of veterans who depended on VA to meet their vital health care needs. 

Mr. Chairman, the decision to exclude PG8 veterans from VA health care enrollment at the beginning of 2003 also must be taken into historical context.  While the Veterans Health Administration (VHA) was in the midst of unprecedented systemic—even revolutionary, change, closing 25,000 hospital beds, shifting its emphasis to community-based primary and preventative services and moving away from reliance on complicated inpatient services and medically unnecessary hospital admissions, Congress passed the Balanced Budget Act (BBA) of 1997, Public Law 105-33.  That Act was intended to flat line all increases in domestic discretionary federal spending, across the board, including funding for VA health care.  As the effects of the BBA took hold during the three-year life of that law, VA’s financial situation shifted from challenging to that of crisis.  In 2000, at the urgings of both this Committee and your Senate counterpart, Congress relented and provided the Veterans Health Administration (VHA) a supplemental appropriation of $1.7 billion.  Nevertheless, a three-year funding drought built up conditions that could not easily be surmounted by one infusion of new funding.  VHA began queuing new veteran enrollees, the waiting list lengthened and rationing of care was commonly reported.  Eventually, by 2002, the list of veterans waiting more than six months for their first primary care appointment inched toward 300,000 nationwide.  Given an Administration that would not permit additional funding to stem the waiting list buildup, Secretary Principi, using the policy available to him, shut off new enrollments of PG8 veterans and set about a plan to get the waiting list under control. 

Another consideration important to this discussion is that the BBA also authorized a ten-site “Medicare subvention” demonstration project within the Department of Defense (DoD) health care system as a precursor to the advent of Medicare subvention in VHA.  This program eventually failed in DoD and, later known as “VA+Choice Medicare” and later still, “VAAdvantage,” never got off the ground in VA due to opposition by the Office of Management and Budget (OMB) and the Department of Health and Human Services.  This failure meant that no Medicare funds would ever be received by VHA for the care it had been providing (and is still providing) to fully Medicare-eligible veterans receiving care as enrolled VA patients, at a huge savings to the Medicare trust funds.  Approximately one-half of VHA’s enrolled population is eligible for Medicare.  Many PG8 veterans, in and out of VA, are Medicare eligible as well. 

By 2002, DAV and the veterans organization community began advocating for significant change in VA’s funding system, by shifting the budget function to a mandatory formula.  It was and is obvious to us that this system of an “educated guess” made almost two years in advance of what level of funding VHA would actually need, including gimmicks and other manipulations, is fatally flawed.  Given what is at stake, we will continue to press for assured funding for VA health care or some alternative method to achieve timely and adequate budgets for veterans health care.  We acknowledge and applaud the continued support from this Committee to increase VA health care funding over the last several budget cycles and hope the Committee will schedule a hearing in the near future to consider funding reforms to help stabilize the system. 

An additional perspective to consider with respect to funding and the status of PG8 veterans is that of the President’s Task Force to Improve Health Care Delivery for Our Nation’s Veterans.  Dr. Gail Wilensky, Co-Chair of that task force, testified before your Committee on March 26, 2003, two months following the exclusion of PG8 veterans from VA enrollment.  She stated:

“As I noted earlier, as the Task Force addressed issues set out directly in our charge, we invariably kept coming up against concerns relating to the current situation in VA in which there is such a mismatch between the demand for VA services and the funding available to meet that demand.  It was clear to us that, although there has been a historical gap between demand for VA care and the funding available in any given year to meet that demand, the current mismatch is far greater, for a variety of reasons, and its impact potentially far more detrimental, both to VA’s ability to furnish high quality care and to the support that the system needs from those it serves and their elected representatives. 

The PTF members were very concerned about this situation, both because of its direct impact on VA care as well on how it impacted overall collaboration [with DoD].  Our discussion on the mismatch issue stretched over many months and, as anyone following the work of the Task Forces already knows, it was the area of the greatest difference of opinion among the members.

Although we did not reach agreement on one issue in the mismatch area – that is, the status of veterans in Category 8, those veterans with no service-connected conditions with incomes above the geographically adjusted means test threshold – we were unanimous as to what should be the situation for veterans in Categories 1 through 7, those veterans with service-connected conditions or with incomes below the income threshold.”

Unfortunately, we must surmise based on the above historical recounting and our analysis that the readmission of PG8 veterans to VHA, absent a major reformation of VA’s funding system, will stimulate and trigger a new funding crisis in VA health care.  While Congress is poised to add a significant new funding increase to the VA medical accounts for fiscal year 2008, one that we deeply appreciate, we are uncertain that even that generous increase will be sufficient to offset all of VA’s financial requirements.   Also, it should be pointed out that the needs of these newly admitted patients would be challenging for VHA’s human resources and capital programs.  We are concerned whether sufficient health professional manpower could be recruited to enable VHA to put them into place in an orderly fashion to meet this new demand.  Also, VA’s physical space may be insufficient to accommodate the new outpatient visits that PG8 patients will generate.

In summary, Mr. Chairman and Members of the Committee, the question about PG8 veterans reenrolling in VA health care is not a question only about them and their needs for health care.  It is also a larger question about the sufficiency, reliability and dependability of the current system of funding VA health care through the domestic discretionary appropriations process.  As far as DAV is concerned, we should not have one without the other.  To that end, DAV challenges this Committee to identify an American business that could operate successfully and remain viable if, in twelve consecutive years, it had no advance confidence about the level of its projected revenues or the resources it needed to bring a product or service to market, no ability to plan beyond the immediate needs of the institution day-to-day, and no freedom to operate on the basis of known or expected need in the future.  In fact this has been the situation in VHA, with 12 consecutive Continuing Resolutions to begin its fiscal years, creating a number of conditions that are preventable and avoidable with basic reforms in funding.  Until those reforms are enacted to guarantee that on October 1 of each year, VHA will have a known budget in hand, will have the means and methods to spend those funds in accordance with need, and that VA’s budget will be based on a stable, predictable and sufficient methodology, we are reluctant to endorse immediate readmission of PG8 veterans into the VA health care system.  We take this position despite our acknowledgement that PG8 veterans bring vitality to the system that is important to service-disabled veterans who need sustained VA health care.

One final matter warrants attention of the Committee on the question of PG8 veterans.  Veterans of our current overseas wars are granted two years of eligibility for VA health care post-discharge.  For those without service-connected disabilities, they are enrolled as PG8 veterans.  When that two year eligibility window closes, those who are enrolled remain enrolled as PG8.  A nonservice-connected Vietnam veteran, or a veteran of an earlier war, who applies for enrollment and whose income exceeds the PG8 threshold, is denied access under the current policy.  This kind of differentiation between classes of veterans sets the stage for a “two-tiered” health care system, one that provides ready access to the newest veterans but may deny any access to older ones.  DAV is very troubled by this inequity.

Mr. Chairman, this concludes my statement, and I will be pleased to respond to your questions and those of other Members of the Committee.