Mr. Chairman and Members of the Committee, on behalf of the National Association of State Veterans Homes (“NASVH”), thank you for holding this hearing on H.R. 4241, legislation that would remedy the unintended 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 “70 Percent Program”).  Implementation of the 70 Percent Program is not only inhibiting the long-term care of service-connected disabled Veterans (the opposite of its intended effect), but it is also threatening the financial viability of many of the nation’s State Veterans Homes.

NASVH consists of the administrators and staff of State-operated Veterans homes throughout the United States and the Commonwealth of Puerto Rico.  NASVH members currently operate 137 Veterans Homes in all 50 States and Puerto Rico.  Our nursing homes provide approximately 28,000 nursing home and domiciliary beds for Veterans and their spouses, and the gold-star parents of Veterans.  Our nursing homes assist the United States Department of Veterans Affairs (“VA”) by caring 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.

The national State Veterans Home system is an economical alternative to other VA long-term care programs.  In fact, the VA Office of Inspector General has reported:

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.

Implementation of the 70 Percent Program, however, is creating very serious difficulties for State Veterans Homes throughout the country.  This program authorized payment of different per diem amounts by VA to State Veterans Homes which provide nursing home care to Veterans with service-connected disabilities.  The VA did not issue regulations to implement the 70 Percent Program until April 29, 2009, and problems arose immediately with its implementation.  NASVH has met with VA officials in an attempt to address these problems administratively, but the VA has informed us that the issue can only be resolved fully by a modification of the law. 

NASVH strongly supported, and strongly supports, the intent of the 70 Percent Program, which originated in legislation drafted by Senator Daniel Akaka and Congressman Jeb Bradley.  In fact, after the enactment of the Veterans’ Millennium Health Care and Benefits Act in 1999 (the “Millennium Act”), NASVH noted a disparity in the long-term care treatment of service-connected disabled Veterans.  Specifically, after enactment of the Millennium Act, a service-connected disabled Veteran could receive cost-free care at a private community nursing home under a VA community nursing home contract, but that same service-connected disabled Veteran could not receive cost-free treatment at a State Veterans Home.  Accordingly, Senator Akaka, Chairman of the Senate Committee on Veterans’ Affairs, and Congressman Bradley introduced legislation to eliminate this disparity.

Chairman Akaka’s legislation tried to achieve parity in the provision of nursing home benefits for our Veterans between community nursing homes and State Veterans Homes. Unfortunately, the implementation of Chairman Akaka’s legislation has failed to achieve such parity and has resulted in numerous problems and unintended consequences.

Specifically, although the VA regulations implementing the 70 Percent Program state that they provide 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 nursing home care to Veterans with service-connected disabilities.  As implemented, the program simply does not provide to many State Veterans Homes adequate reimbursement for their actual cost of care for disabled Veterans, despite congressional intent that it do so.  To the extent that State Veterans Homes continue to admit service connected disabled veterans under the 70 Percent Program, it threatens the continued financial viability of such State Veterans Homes.

This problem is particularly acute in the 30 States that have Medicare-certified and/or Medicaid-certified State Veterans Homes.  The impact is significant enough to have caused several such States already to incur substantial financial losses on the care of service-connected disabled Veterans under the 70 Percent Program, and others to refrain from admitting Veterans with service-connected disabilities, in order to avoid such financial losses.  Accordingly, the implementation of the 70 Percent Program is having exactly the opposite result envisioned by Congress.

Although numerous representatives from NASVH, the American Health Care Association, the National Governors’ Association, and others have all met with senior VA officials including Dr. James Burris to attempt to remedy the problems with the 70 Percent Program, we have been frustrated by the fact that senior VA officials appear simply to be unable or unwilling to address the 70 Percent Program’s serious financial problems.

These problems can be illustrated by many examples from State Veterans Homes, several of which the Committee will hear today.  One typical example comes from my home State of Vermont.  Prior to implementation of the 70 Percent Program, Sergeant Jakob Lurie (a pseudonym for a 70 percent service-connected disabled veteran) was admitted to the Vermont Veterans’ Home, which is Medicare and Medicaid certified.  He had experienced a three-day hospital stay and was admitted to the Vermont Veterans’ Home thereafter under Medicare.  Sergeant Lurie had an acute medical condition that required rehabilitation.  As a result, Sergeant Lurie received three hours of therapy each day, including an hour each day of physical, occupational, and speech therapy.

As detailed below, the average daily cost for Sergeant Lurie was $476.51.  Under the 70 Percent Program, however, the Vermont Veterans’ Home would have received only $302.00 a day for Sergeant Lurie’s Care.  The math does not add up under the 70 Percent Program, especially for Veterans requiring skilled nursing care.

In this example from the Vermont Veterans’ Home:

(Room and Board, includes all nurses, aides, meals, dietary, social work staff, electricity, fuel for heat, medical supplies, adult briefs, etc.)

Compared to a 70 Percent Program calculated payment of only $302.00/day, this is a loss to the Vermont Veterans’ Home of $174.51/day for just one resident.

After I calculated the loss that the Vermont Veterans’ Home would have incurred on Sergeant Lurie under the 70 Percent Program, I calculated the substantial actual losses and minor gains that the Vermont Veterans’ Home has experienced for other Veterans under the 70 Percent Program. These losses and gains are as follows:

Currently, the Vermont Veterans’ Home has ten Veterans who qualify for the VA 70 Percent Program and this number is expected to grow.  At a 70 Percent Program payment of $302 per day, below are the actual financial results for these ten Veterans:

On the average, the 70 Percent Program rate will result, for just the first ten veterans admitted under the Program, in an annual loss to the Vermont Veterans’ Home of $181,113.00.

As Veterans age, their medical needs often increase and further aggravate the shortfall between a State Veterans Home’s costs and VA payments under the 70 Percent Program.

NASVH supports H.R. 4241, introduced by Congressman Michael H. Michaud. The enactment of H.R. 4241 would allow service-connected disabled veterans to receive the nursing home care that Congress intended, while reimbursing State Veterans Homes fully and more accurately for such care.

H.R. 4241 would do four things.  First, it would allow State Veterans Homes to serve service-connected disabled veterans, at no cost to such veterans, under the VA’s existing community nursing home contract program. This was Senator Akaka’s original intent in proposing the legislation which became the 70 Percent Program, and we believe that such intent should be honored now.

Second, if a community nursing home contract cannot be arranged between the VA and a State Veterans Home for a service-connected disabled Veteran, H.R. 4241 would require that payments under the VA’s 70 Percent Program be computed according to a State Veterans Homes’ actual cost to care for a Veteran, and not computed according to OMB Circular A-87, which in almost all instances allows a lesser reimbursement than the prevailing rate determined by the Secretary of the VA.

Third, H.R. 4241 would clarify that State Veterans Homes and private medical providers could continue to receive payment from sources other than the VA for services not reimbursed under the 70 Percent Program and required for the medical treatment of service-connected disabled veterans residing in State Veterans Homes.

Fourth, H.R. 4241 would clarify, consistent with existing law, that payments made to a State Veterans Home under the 70 Percent Program cannot be offset against any other payment made to assist a service-connected disabled veteran.

In addition, NASVH would support a clarification to H.R. 4241 to emphasize the fact that a State Veterans Home cannot receive payment from the VA under more than one of the following alternative programs: (1) the community nursing home contract program; (2) the 70 Percent Program; or (3) the VA’s basic (lower) per diem program, plus Medicaid or Medicare, for a Veteran residing in a State Veterans Home, and that a State Veterans Home cannot receive payment more than once for the same service provided to any Veteran by a State Veterans Home. These requirements generally are already subject to normal audits by the VA, Medicare, and Medicaid under existing law, and can be enforced easily under existing auditing processes. Lastly, we believe that the VA should pay any co-pay required for the receipt of Medicare or Medicaid services under the 70 Percent Program by a veteran so that such care is provided at no cost to such veteran. Payment in full by the VA for a veterans care means payment in full by the VA.

NASVH believes that enactment of H.R. 4241 will resolve the problems that have arisen in implementing the 70 Percent Program, and permit all State Veterans Homes to admit 70 percent Veterans without adverse financial consequences.  We welcome the efforts of this Committee, the Senate Committee on Veterans’ Affairs, and the VA to work together to solve at the earliest possible time the reimbursement problems with the 70 Percent Program.

There is widespread support for our efforts to address this issue promptly.  In addition to NASVH, the National Association of State Directors of Veterans Affairs, the National Governors’ Association, and the American Health Care Association have all called for action to remedy the reimbursement problems associated with the 70 Percent Program.  I have attached copies of resolutions and letters from these organizations in support of our efforts.  Other Veterans service organizations such as the Military Order of the Purple Heart, the Catholic War Veterans, American Gold Star Mothers, and the American Legion all have indicated their support for H.R. 4241 as well.

It has been asked whether the reimbursement deficiencies under the 70 Percent Program could be resolved by the use of “fee basis care” payments from the VA to State Veterans Homes to cover costs not covered by per diem payments under the 70 Percent Program.  NASVH does not believe that fee basis care payments ultimately can resolve this problem.  Fee basis care payments are discretionary by the VA, are largely not designed for long-term nursing home care, and do not cover many services required for nursing home care.

NASVH believes that the fairest and most accurate way to reimburse Medicare-certified and Medicaid-certified State Veterans Homes for the care of service-connected disabled Veterans under the 70 Percent Program is for the VA to use the example of the existing Medicare payment system as much as possible. Under Medicare, reimbursements for nursing home care fluctuate according to the acuity (degree of illness) of individual patients.  Required pharmaceuticals and specialty care are automatically reimbursed, if legitimately required. Nursing homes do not ordinarily lose substantial amounts of money for patient care under the Medicare program.  Accordingly, NASVH believes that Congress should not require the 30 States which operate Medicare-certified and Medicaid-certified State Veterans Homes to change fundamentally the way they fund their State Veterans Homes.  Congress rather should require the VA to coordinate its reimbursement schedules under the 70 Percent Program, to the extent possible, with the example of the existing Medicare system.

I want to thank you, Mr. Chairman, the entire House Veterans’ Affairs Committee, and its professional staff, for the leadership and skill that you have shown in addressing the long-term care needs of our nation’s service-connected disabled Veterans within the State Veterans Home system.  I am sure that, working together, we can promptly remedy the serious problems that exist in the VA’s current 70 Percent Program.

Attachments [The attachments are being retained in the Committee files.]

[1] Per Federal regulations, a Veteran must be seen by a physician within 48 hours of admission for a full history and physical; then every 30 days for the first 90 days; then every 60 days. This schedule applies only if the Veteran is medically stable. Often, Veterans are not medically stable and must be seen more frequently.