Good afternoon Mr. Chairman and members of the Committee.  I appreciate the opportunity to appear before you today to discuss H.R. 4241 and the mechanism by which the Department of Veterans Affairs (VA) supports the States’ operation of their nursing homes for mandatory Veterans.  I will use the term “mandatory Veterans” to refer to Veterans who have a service connected disability rated 70 percent or more or need nursing home care for their service connected disability.  Under the State home program, VA provides support to States to construct and operate nursing homes and domiciliaries for the care of Veterans.  In return, State homes provide nursing home care to many of our Nation’s Veterans. Today, there are 137 State homes, and every State operates at least one.  Last fiscal year, 27,413 Veterans were cared for in these homes. 

IMPLEMENTATION OF NEW PER DIEM FOR MANDATORY VETERANS

For many years prior to the enactment of Public Law 109-461, VA paid the full cost of these Veterans’ care in VA or private nursing homes but not in State homes.  By law, VA could only pay one rate for all eligible Veterans in a State home.  The rate was the lesser of one-half of the cost of the care in the State home or an amount established by VA each year.  This changed when, in 2006, Congress directed VA to pay State nursing homes a new rate for mandatory Veterans:  the lesser of a prevailing rate determined by VA or the actual cost of care in the State home.  VA regulations implementing this congressional mandate were effective May 29, 2009, with provision for retroactive payment to March 21, 2007. 

Although a number of States are satisfied with the new rates VA pays for mandatory Veterans, several have reported problems. Some States report that after the enactment of Public Law 109-461, they now receive smaller total payments for the care of these veterans because they are no longer able to bill Veterans or other payors.  Some States report that the VA payments do not cover their actual costs and as a result, they cannot afford to admit mandatory Veterans anymore.  Other States reported that VA facilities stopped providing specialty physician services to their mandatory Veterans.  We are committed to taking steps to ascertain circumstances where the intent of Public Law 109-461 is not being met, and work with the State home program for remedies to avoid any adverse impact upon Veterans.

In an effort to further understand these reported difficulties, VA has met with representatives of the National Association of State Directors of Veterans Affairs, the National Association of State Veterans Homes, the National Governors Association, congressional staff. .  We believe that with the help of the State Veterans Homes represented here today there are non-legislative steps that can be taken to resolve the difficulties reported by the States.  We have asked States to share with us supporting documentation that demonstrates how their actual costs for the care of these veterans exceed the allowable VA per diem payment under current law.  With this information, we will be better positioned to understand the impact of Public Law 109-461 and address their concerns.

VA has already taken steps toward resolving one of those reported difficulties.  On October 19, 2009, VA issued guidance to its field facilities that the “full per diem payment” to State homes covers nursing home services only and that VA facilities must continue to provide most specialty care to mandatory Veterans as they did prior to the initiation of the new payments.  That clarification eliminated one source of confusion.

Further, we believe that some States need assistance in understanding the provisions of the Office of Management and Budget (OMB) Circular A-87, which States must use to compute their actual cost of care for mandatory Veterans.  VA has offered to work individually with States to improve their understanding. We will continue to work with the State homes and our other partners to ensure that Veterans are being served appropriately.

H.R. 4241

H.R. 4241 contains several provisions intended to resolve the difficulties that States have with the new VA payments for mandatory Veterans.  Section 1(a)(3) of the bill would authorize VA to enter into agreements with State homes to provide care for mandatory Veterans under VA’s contract nursing home care authority in lieu of making per diem payments.  As noted, different State homes have widely varying circumstances and patient populations – without a complete understanding of how State homes are currently being impacted by Public Law 109-461, we are unable to comment on whether a contract mechanism would be a viable solution to the reported problems.

Section 1(b) of the bill would delete the requirement in current law that VA pay the actual cost of care if that cost is less than the prevailing rate (i.e., VA would simply pay the prevailing rate, which for most States is higher than the calculated actual cost).  VA opposes this provision, as it would result in VA paying more than the actual cost of care. 

Section 1(c) would provide that VA’s “full per diem” payments for mandatory Veterans’ nursing home care is payment in full only with respect to other VA payments under title 38, United States Code.  State homes could thus bill other payors for this care, including the mandatory Veterans themselves. VA’s payment is intended to be payment in full with respect to the Veteran, and elimination of Veteran billing (and the resulting disparity with VA Community Living Centers and contracted arrangements) was part of the purpose of the changes made in Public Law 109-461.  We therefore oppose this provision. 
Section 1(d) would permit State homes to bill Medicare and Medicaid for nursing home care provided to mandatory Veterans without these payments being reduced by the amount of the VA payments.  As noted above, VA’s payment for mandatory Veterans is intended to be payment in full for nursing home care.  Because this provision could result in the Federal government making duplicate payments for the same care, we oppose it as well. 

We anticipate that enactment of H.R. 4241 would require additional VA expenditures of approximately $17.5 million in the first year and more than $200 million over 10 years.

Thank you once again for the opportunity to testify.  We are prepared to address your questions.