Chairman Michaud, Ranking Member Brown, and members of the Subcommittee, Paralyzed Veterans of America (PVA) is pleased to present our views on the Department of Veterans Affairs (VA) Veterans Health Administration’s (VHA) Fiscal Year 2011 budget, in particular as it relates to construction.  As one of the four co-authors of The Independent Budget (IB), much of our testimony will directly correspond to testimony last week on the views of The Independent Budget regarding the funding requirements for the VA health care system for FY 2011.

When looking back on 2009, it is fair to say that the 111th Congress took an historic step toward providing sufficient, timely, and predictable funding, and yet it still failed to complete its appropriations work prior to the start of the new fiscal year on October 1.  The actions of Congress last year generally reflected a commitment to maintain a viable VA health care system.  More important, Congress showed real interest in reforming the budget process to ensure that the VA knows exactly how much funding it will receive in advance of the start of the new fiscal year.  This is particularly critical to VHA.  With the President’s signature on P.L. 111-81, the “Veterans Health Care Budget Reform and Transparency Act,”  and the enactment of advance appropriations, the VA can properly plan to meet the health care needs of the men and women who have served this nation in uniform.   

In February 2009, the President released a preliminary budget submission for the Department of Veterans Affairs for FY 2010.  This submission only projected funding levels for the overall VA budget.  The Administration recommended an overall funding authority of $55.9 billion for the VA, approximately $5.8 billion above the FY 2009 appropriated level and nearly $1.3 billion more than The Independent Budget had recommended.

In May, the Administration released its detailed budget blueprint that included approximately $47.4 billion for medical care programs, an increase of $4.4 billion over the FY 2009 appropriated level and approximately $800 million more than the recommendations of The Independent Budget.  The budget also included $580 million in funding for Medical and Prosthetic Research, an increase of $70 million over the FY 2009 appropriated level.  By the end of the year, Congress enacted P.L. 111-117, the “Consolidated Appropriations Act for FY 2010,” that provided funding for the VA to virtually match the recommendations of the Administration.  While the importance of these historic funding levels coupled with the enactment of advance appropriations legislation cannot be overstated, it is important for Congress and the Administration to continue this commitment to the men and women who have served and sacrificed for this country. 

Funding for FY 2011

Included in P.L 111-117 was advance appropriations for FY 2011.  Congress provided approximately $48.2 billion in discretionary funding for VA medical care.  When combined with the $3.3 billion Administration projection for medical care collections in 2010, the total available operating budget provided by the appropriations bill is approximately $51.5 billion.  Accordingly for FY 2011, The Independent Budget recommends approximately $52.0 billion for total medical care, an increase of $4.5 billion over the FY 2010 operating budget level established by P.L. 111-117.  We believe that this estimation validates the advance projections that the Administration developed last year and has carried forward into this year.  Furthermore, we remain confident that the Administration is headed in a positive direction that will ultimately benefit veterans who rely on the VA health care system to receive their care.

However, PVA continues to be seriously concerned about reports of VA’s continued inappropriate billing of service connected veterans for service connected injuries as well as non-service connected veterans being billed multiple times for the same treatment.  Inappropriate charges for VA medical services places unnecessary financial stress on individual veterans and their families.  These inaccurate charges are not easily remedied and their occurrence places the burden for correction directly on the veteran, their families or caregivers.  PVA believes that many veterans are not aware of these mistakes and simply submit full payment to VA when a billing statement arrives at their home.  If Congress and the Administration are going to continue to rely on massive collections estimates and dollars actually collected to support the VA health care budget, then serious examination of how the VA is achieving these numbers is necessary.

The medical care appropriation includes three separate accounts—Medical Services, Medical Support and Compliance, and Medical Facilities—that comprise the total VA health care funding level.  For FY 2011, The Independent Budget recommends approximately $40.9 billion for Medical Services.  Our Medical Services recommendation includes the following recommendations:

Our growth in patient workload is based on a projected increase of approximately 117,000 new unique patients—Priority Group 1-8 veterans and covered non-veterans.   We estimate the cost of these new unique patients to be approximately $926 million.  The increase in patient workload also includes a projected increase of 75,000 new Operation Enduring Freedom and Operation Iraqi Freedom (OEF/OIF) veterans at a cost of approximately $252 million. 

Finally, our increase in workload includes the projected enrollment of new Priority Group 8 veterans who will use the VA health care system as a result of the Administration’s plan to incrementally increase the enrollment of Priority Group 8 veterans by 500,000 enrollments by FY 2013.  We estimate that as a result of this policy decision, the number of new Priority Group 8 veterans who will enroll in the VA will increase by 125,000 in each of the next four years.  Based on the Priority Group 8 empirical utilization rate of 25 percent, we estimate that approximately 31,250 of these new enrollees will become users of the system.  This translates to a cost of approximately $125 million. 

As we have emphasized in the past, the VA must have a clear plan for incrementally increasing this enrollment.  Otherwise, the VA risks being overwhelmed by significant new workload.  The Independent Budget is committed to working with the VA and Congress to implement a workable solution to allow all eligible Priority Group 8 veterans who desire to do so to begin enrolling in the system.

Our policy initiatives have been streamlined to include immediately actionable items with direct funding needs.  Specifically, we have limited our policy initiatives recommendations to restoring long-term care capacity (for which a reasonable cost estimate can be determined based on the actual capacity shortfall of the VA) and centralized prosthetics funding (based on actual expenditures and projections from the VA’s prosthetics service).  In order to restore the VA’s long-term care average daily census (ADC) to the level mandated by P.L. 106-117, the “Veterans Millennium Health Care Act,” we recommend $375 million.  Finally, to meet the increase in demand for prosthetics, the IB recommends an additional $275 million.  This increase in prosthetics funding reflects the significant increase in expenditures from FY 2009 to FY 2010 and the expected continued growth in expenditures for FY 2011.  The funding for prosthetics is particularly important because it reflects current services and represents a demonstrated need now; whereas, our funding recommendations for long-term care reflect our desire to see this capacity expanded beyond the current services level.

For Medical Support and Compliance, The Independent Budget recommends approximately $5.3 billion.  Finally, for Medical Facilities, The Independent Budget recommends approximately $5.7 billion.  Our recommendation once again includes an additional $250 million for non-recurring maintenance (NRM) provided under the Medical Facilities account.  This would bring our overall NRM recommendation to approximately $1.26 billion for FY 2011.  While we appreciate the significant increases in the NRM baseline over the last couple of years, total NRM funding still lags behind the recommended two to four percent of plant replacement value.  Based on that logic, the VA should actually be receiving at least $1.7 billion annually for NRM. 

For Medical and Prosthetic Research, The Independent Budget recommends $700 million.  This represents a $119 million increase over the FY 2010 appropriated level, and approximately $110 million above the Administration’s request.  We are particularly pleased that Congress has recognized the critical need for funding in the Medical and Prosthetic Research account in the last couple of years.  Research is a vital part of veterans’ health care, and an essential mission for our national health care system.  We are extremely disappointed in the Administration’s decision to virtually flat line the research budget.  VA research has been grossly underfunded in contrast to the growth rate of other federal research initiatives.  At a time of war, the government should be investing more, not less, in veterans’ biomedical research programs. 

As explained in The Independent Budget, there is a significant backlog of major and minor construction projects awaiting action by the VA and funding from Congress.  We have been disappointed that there has been inadequate follow-through on issues identified by the Capital Asset Realignment for Enhanced Services (CARES) process.  In fact, we believe it may be time to revisit the CARES process altogether.  For FY 2011, The Independent Budget recommends approximately $1.295 billion for Major Construction and $785 million for Minor Construction.  The Major Construction recommendation includes approximately $100 million for research infrastructure and the Minor Construction recommendation includes approximately $200 million for research facility construction needs. 

We note that the Budget Request reduces funding for Major Construction and slashes funding for Minor Construction.  Despite additional funding that has been provided in recent years to address the construction backlog and maintenance needs facing VA, a great deal remains to be done.  We cannot comprehend what policy decisions could justify such a steep decrease in funding for Minor Construction.  Specifically, there are two areas where PVA is significantly concerned.

VA Research Infrastructure Funding Shortfalls

In recent years, funding for the VA maintenance and construction appropriations has failed to provide the resources needed by VA to maintain, upgrade, and replace its aging research facilities. Consequently many VA facilities have run out of adequate research space. Also, ventilation, electrical supply, roofs and plumbing deficiencies appear frequently on lists of urgently needed upgrades along with significant space reconfiguration. In the 2003 Draft National Capital Asset Realignment for Enhanced Services (CARES) Plan, VA listed $468.6 million designated for new laboratory construction, renovation of existing research space, and build-out costs for leased research facilities. However, these capital improvement projects were omitted from the Secretary’s final report on capital planning consequential to the CARES effort.

In House Report 109-95 accompanying “the FY 2006 VA Appropriations Act,” the House Appropriations Committee expressed concern that “equipment and facilities to support the research program may be lacking and that some mechanism is necessary to ensure the Department’s research facilities remain competitive.” In the same report, the Committee directed VA to conduct “a comprehensive review of its research facilities and report to the Congress on the deficiencies found and suggestions for correction of the identified deficiencies.”  VA piloted the evaluation instrument and methodology in FY 2006 at three sites—Central Arkansas Veterans Health System, Little Rock; VAMC Salt Lake City; and VA New York Harbor Health Care System (Manhattan and Brooklyn campuses).  All three sites scored within the “poor” range (D on an A to F scale) with a total correction cost of over $26 million. 

In FY 2008, the VA Office of Research and Development (ORD) followed up with an as yet incomplete examination of all VA research infrastructure, for physical condition, capacity for current research, as well as needed program growth and sustainability of VA space to conduct research. According to an October 26, 2009, ORD report to the VA National Research Advisory Committee, surveys to date support the pilot findings: “There is a clear need for research infrastructure improvements throughout the system, including many that impact on life safety.”

By the end of FY 2009, a total of 53 sites within 47 research programs will have been surveyed. Approximately 20 sites remain to be assessed in FY 2010. To date, the combined total estimated cost for improvements exceeds $570 million.  About 44 percent of the estimated correction costs constitute “priority 1” deficiencies—those with an immediate need for correction to return components to normal service or operation; stop accelerated deterioration; replace items that are at or beyond their useful life; and correct life-safety hazards.   Furthermore, only six buildings (of 38 buildings surveyed) at five sites were rated above the “poor” range. Three of the seven buildings rated above “poor” were structures housing the main hospital.  Five buildings that rated “poor” were main hospitals housing laboratories.

A significant cause of the VA research infrastructure’s neglect is that there is no direct funding line, nor any budgetary request made, for VA research facilities.  Nor does the VA Medical and Prosthetic Research appropriation contain funding for construction, renovation, or maintenance of VA research facilities.  VA researchers must rely on local facility management to repair, upgrade, and replace research facilities and capital equipment associated with VA’s research laboratories.  As a result, VA research competes with medical facilities’ direct patient care infrastructure needs (such as elevator replacement, heating and air conditioning upgrades, operating room equipment and space upgrades, outpatient clinic space construction or renovations, and capital equipment upgrades and replacements such as X-ray machines and MRIs) for funds provided under either the VA Medical Facility appropriation account or the VA Major and Minor Construction appropriations accounts.  VA investigators’ success in obtaining funding from non-VA sources exacerbates VA’s research infrastructure problems because non-VA grantors typically provide no funding to cover the costs to VA medical centers of housing extramurally funded projects.

We anticipate VA’s ongoing research facilities assessment will identify a need for research infrastructure funding significantly greater than the 2003 Draft National CARES report. As VA moves forward with its research facilities assessment, we urge Congress to require VA to submit the resulting report to the House and Senate Committees on Appropriations and Veterans’ Affairs by June 1, 2010.  Surfacing this key report will ensure that the Administration and Congress are well informed of the deteriorating condition of VA’s research infrastructure and of its funding needs so these may be fully considered in the budget formulation process.

In accordance with the recommendations of The Independent Budget, to address the VA research infrastructure’s defective funding mechanism, PVA recommends the Administration and Congress establish a new appropriations account to independently define and separate VA research infrastructure funding needs from capital and maintenance funding for direct VA medical care.  The account should be sub-divided for major and minor construction, and for maintenance and repair needs. This revision in appropriations accounts will empower VA to address research facility needs without interfering with direct health care infrastructure.  We believe correction of the known infrastructure deficiencies should not be further delayed and consistent with the recommendations of The Independent Budget, we recommend an appropriation in FY 2011 of $300 million dedicated exclusively to renovating existing research facilities to address the current and well-documented shortfalls in research infrastructure.

Maintain Critical VA Health Infrastructure

Over the past year, VA has begun to discuss its desire to address its health infrastructure needs in a new way.  VA has acknowledged its challenges with aging infrastructure; changing health-care delivery needs, including reduced demand for inpatient beds and increasing demand for outpatient care and medical specialty services; limited funding available for construction of new facilities, that are growing prohibitively expensive; frequent delays in constructing and renovating space needed to increase access, and particularly the timeliness of construction projects.  VA has noted, and we concur, that a decade or more is required from the time VA initially proposes a major medical facility construction project, until the doors actually open for veterans to receive care in that facility. 

Given these significant challenges, VA has developed a new model for health-care delivery, the Health Care Center Facility (HCCF) leasing program.  Under the HCCF proposal, in lieu of the traditional approach to major medical facility construction, VA would obtain by long-term lease, a number of large outpatient clinics built to VA specifications.  These large clinics would provide a broad range of outpatient services, including primary and specialty care as well as outpatient mental health services and ambulatory surgery.  Inpatient needs at such sites would probably be managed through contracts with affiliates or local private medical centers, although today we are unclear on how such arrangements would be managed.

VA noted that, in addition to its new HCCF facilities, it would maintain its VA medical centers (VAMCs), larger independent outpatient clinics, community-based outpatient clinics (CBOCs) and rural outreach clinics.  VA has argued that adopting the HCCF model would allow VA to quickly establish new facilities that would provide 95 percent of the care and services veterans need in their catchment areas, specifically primary care, and a variety of specialty services, mental health, diagnostic testing and same-day ambulatory surgery. 

We concur with VA that the HCCF model seems to offer a number of benefits in addressing its capital infrastructure problems including more modern facilities that meet current life-safety codes; better geographic placements; increased patient safety; reductions in veterans’ travel costs and increased convenience; flexibility to respond to changes in patient loads and technologies; potential savings in operating costs and in facility maintenance; and, reduced overhead in maintaining outdated medical centers.

While it offers some obvious advantages, the HCCF model could face significant challenges.  PVA is particularly concerned about the overall impact on the future of VA’s system of care, including the potential unintended consequences on continuity of high-quality care; maintenance of its specialized medical programs for spinal cord injury, blindness, amputations and other health challenges of seriously disabled veterans; delivery of comprehensive services; its recognized biomedical research and development programs; and the impact on VA’s renowned graduate medical education and health professions training programs, in conjunction with longstanding affiliations with nearly every health professions university in the nation.

Moreover, we believe the HCCF model could well challenge VA’s ability to provide alternatives to maintaining directly its existing 130 nursing home care units, homelessness programs, domiciliaries, compensated work therapy programs, hospice and respite, adult day health-care units, the Health Services Research and Development Program.  Additionally, the unique nature of highly specialized services could be compromised including 24 spinal cord injury centers, 10 blind rehabilitation centers, a variety of unique “centers of excellence” (in geriatrics, gerontology, mental illness, Parkinson’s, and multiple sclerosis), and critical care programs for veterans with serious and chronic mental illnesses. 

In general, the HCCF proposal could be a positive development, with good potential.  Leasing has the advantage of avoiding long and costly in-house construction delays and can be adaptable, especially when compared to costs for renovating existing VA major medical facilities.  Leasing options have been particularly valuable for VA as evidenced by the success of the leased space arrangements for many VA community-based outpatient clinics and Vet Centers.  However, VA says it will contract for these essential inpatient services with VA affiliates or community hospitals if needed.  First and foremost, VA must provide assurances that this approach will not negatively impact safety, quality and continuity of care, and permanently privatize many services we believe VA should continue to provide.  We have testified on this topic and have expressed objections in the Contract Care Coordination and Community Based Outpatient Clinics sections of The Independent Budget.

We agree with VA’s assertion that it needs a balanced capital assets program, of both owned and leased buildings, to ensure demands are met under current projections.  Likewise, we agree with VA that the HCCF concept could provide modern health-care facilities relatively quickly that might not otherwise be available due to the predictable constraints of VA’s major construction program.  On the other hand, if VA plans to replace the majority or even a large fraction of all VAMCs with HCCFs, such a radical shift would pose a number of concerns for us.  But we see this challenge as only a small part of the overall picture related to VA health infrastructure needs in the 21st century.  The emerging HCCF plan does not address the fate of VA’s 153 medical centers located throughout the nation that are on average 55 years of age or older.  It does not address long-term care needs of the aging veteran population, inpatient treatment of the chronically and seriously mentally ill, the unresolved rural health access issues, or the lingering questions on improving VA’s research infrastructure.  The major question is what will VA’s 21st Century health infrastructure look like and how it will be managed and sustained?  Fully addressing these and related questions is extremely important and will impact generations of sick and disabled veterans. 

Congress and the Administration must work together to secure VA’s future to design a VA of the 21st century.  It will take the joint cooperation of Congress, veterans’ advocates, and the Administration to support this reform, while setting aside resistance to change, even dramatic change, when change is demanded and supported by valid data.  Accordingly, we urge the Administration and Congress to live up to the President’s words by making a steady, stable investment in VA’s capital infrastructure to bring the system up to match the 21st century needs of veterans.

Finally, one of our community’s frustrations with respect to VA’s infrastructure plans is lack of consistent and periodic updates, specific information about project plans, and even elementary communications.  We ask VA to improve the quality and quantify of communication with the VSOs, enrolled veterans, concerned labor organizations and VA’s own employees, affiliates and other stakeholders, as the VA capital and strategic planning process moves forward.  We believe that all of these groups must be made to understand VA’s strategic plan and how it may affect them, positively and negatively.  Talking openly and discussing potential changes will help resolve the understandable angst about these complex and important questions of VA health-care infrastructure.  While we agree that VA is not the sum of its buildings, and that a veteran patient’s welfare must remain at the center of VA’s concern, VA must be able to maintain an adequate infrastructure around which to build and sustain “the best care anywhere.”  If VA keeps faith with these principles, we are prepared to aid VA in accomplishing this important goal.

This concludes my testimony.  I will be happy to answer any questions you may have.