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Ms. Shannon Middleton

Ms. Shannon Middleton, Veterans Affairs and Rehabilitation Division, Deputy Director, American Legion

Mr. Chairman and Members of the Committee:

Thank you for this opportunity to submit The American Legion’s views on the Veterans Health Administration’s budget request for Fiscal Year 2008.  There is no question that all service-connected disabled veterans and economically disadvantaged veterans must receive timely access to quality health care; however, their comrades-in-arms should also receive their earned benefit – enrollment in the VA health care delivery system.  Rather than supporting legislative proposals designed to drive veterans from the world’s best health care delivery system, The American Legion will continue to advocate new revenue streams to allow any veteran to receive VA health care.  

The American Legion offers the following budgetary recommendations for selected discretionary programs within the Department of Veterans Affairs for FY 2008:


FY06 Funding

President’s Request

Legion’s Request

Medical Care

$30.8 billion

$36.6 billion

$38.4 billion

Medical Services

$22.1 billion

$27.2 billion

$29 billion

Medical Administration

$3.4 billion

$3.4 billion

$3.4 billion

Medical Facilities

$3.3 billion

$3.6 billion

$3.6 billion

Medical Care Collections

($2 billion)

($2.4 billion)

$2.4 billion *

Medical and Prosthetics Research

$412 million

$411 million

$472 million






$1.6 billion

$727 million

$1.3 billion


$233 million

$233 million

$279 million

State Extended Care Facilities Grant Program

$85 million

$85 million

$250 million

Third-party reimbursements should supplement rather than offset discretionary funding.


The Department of Veterans Affairs standing as the nation’s leader in providing safe, high-quality health care in the health care industry (both public and private) is well documented.  Now VA is also recognized internationally as the benchmark for health care services:

  • December 2004, RAND investigators found that VA outperforms all other sectors of the U.S. health care industry across a spectrum of 294 measures of quality in disease prevention and treatment;
  • In an article published in the Washington Monthly (Jan/Feb 2005) “The Best Care Anywhere” featured the VA health care system;
  • In the prestigious Journal of the American Medical Association (May 18, 2005) noted that VA’s health care system has “... quickly emerged as a bright star in the constellation of safety practice, with system-wide implementation of safe practices, training programs and the establishment of four patient-safety research centers.”;
  • The U.S. News and World Report (July 18, 2005) included a special report on the best hospitals in the country titled “Military Might—Today’s VA Hospitals Are Models of Top-Notch Care” highlighting the transformation of VA health care;
  • The Washington Post (August 22, 2005) ran a front-page article titled “Revamped Veterans’ Health Care Now a Model” spotlights VA health care accomplishments;
  • In 2006, VA received the highly coveted and prestigious “Innovations in American Government” Award from Harvard’s Kennedy School of Government for its advanced electronic health records and performance measurement system; and
  • Recently, in January 2007, the medical journal Neurology wrote: “The VA has achieved remarkable improvements in patient care and health outcomes, and is a cost-effective and efficient organization.” 

Although VA is considered a national resource, the Secretary of Veterans Affairs continues to prohibit the enrollment of any new Priority Group 8 veterans, even if they are Medicare-eligible or have private insurance coverage.  This prohibition is not based on their honorable military service, but rather on limited resources provided to the VA medical care system.  For two years following receiving an honorable discharge, veterans from Operations Enduring Freedom and Iraqi Freedom are able to receive health care through VA, but many of their fellow veterans and those of other armed conflicts may very well be denied enrollment due to limited existing appropriations.  This is truly a national tragedy.

As the Global War on Terrorism continues, fiscal resources for VA will continue to be stretched to their limits and veterans will continue to go to their elected officials requesting additional money to sustain a viable VA capable of caring for all veterans, not just the most severely wounded or economically disadvantaged.  VA is often the first experience veterans have with the Federal government after leaving the military.  This nation’s veterans have never let this country down; Congress and VA should do its best to not let veterans down.

The President’s budget request for FY 2008 calls for Medical Care funding to be $36.6 billion, which is about $1.8 billion less than The American Legion’s recommendation of $38.4 billion.  The major difference is the President’s budget requests continues to offset the discretionary appropriations by its Medical Care Collection Fund’s goal ($2.4 billion), whereas The American Legion considers this collection as a supplement since it is for the treatment of nonservice-connected medical conditions.

Medical Services

The President’s budget request assumes the enrollment of new Priority Group 8 veterans will remain suspended.  The American Legion strongly recommends reconsidering this “lockout” of eligible veterans, especially for those veterans who are Medicare-eligible, military retirees enrolled in TRICARE or TRICARE for Life, or have private health care coverage.  Successful seamless transition from military service should not be penalized, but rather encouraged.  This prohibition sends the wrong message to recently separated veterans.  No eligible veteran should be “locked out” of the VA health care delivery system.

The VA health care system enjoys a glowing reputation as the best health care delivery system in the country, so why “lock out” any eligible veteran, especially those that have the means to reimburse VA for services received?  New revenue streams from third-party reimbursements and co-payments can supplement the “existing appropriations,” but sound fiscal management initiatives are required to enhance third-party collections of reasonable charges.   

In FY 2008, VA expects to treat 5.8 million patients (an increase of 2.4 percent).  According to the President’s budget request, VA will treat over 125,000 more Priority 1-6 veterans in 2008 representing a 3.3 percent increase over the number of these priority veterans treated in 2007.  Priority 7 and 8 veterans are projected to decrease by over 15,000 or 1.1 percent from 2007 to 2008. However, VA will provide medical care to non-veterans; this population is expected to increase by over 24,000 patients or 4.8 percent over this same time period. In 2008, VA anticipates treating 263,000 Operation Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF) veterans, an increase of 54,000 patients, or 25.8 percent, over the 2007 level.

The American Legion supports the President’s mental health initiative to provide $360 million to deliver mental health and substance abuse care to eligible veterans in need of treatment of serious mental illness, to include post-traumatic stress disorder.

The American Legion remains opposed to the concept of charging an enrollment fee for an earned benefit.  Although the President’s new proposal is a tiered approach targeted at Priority Groups 7 and 8 veterans currently enrolled, the proposal does not provide improved health care coverage, but rather creates a fiscal burden for the 1.4 million Priority Groups 7 and 8 patients.  This initiative clearly projects further reductions in the number of Priority Groups 7 and 8 veterans leaving the system for other health care alternatives.  This proposed vehicle for gleaning of veterans would apply to both service-connected disabled veterans as well as nonservice-connected disabled veterans in Priority Groups 7 and 8.

The American Legion also remains opposed to the President’s proposed increase in VA pharmacy co-pays from the current $8 to $15 for enrolled Priority Groups 7 and 8 veterans.  This proposal would nearly double current pharmacy costs to this select group of veterans.

The American Legion recommends $29 billion for Medical Services, $1.8 billion more than the President’s budget request of $27.2 billion.

Medical Administration

The President’s budget request of $3.4 billion is a slight increase in FY 2006 funding level.  VA plans to transfer 3,721 full-time equivalents from Medical Administration to Information Technology in FY 2008.  The American Legion applauds the President recommending this level of funding.

Medical Facilities

The President’s budget request of $3.6 billion is about $234 million more than the FY 2006 funding level.  The American Legion agrees with this recommendation to maintain VA existing infrastructure of 4,900 buildings and over 15,700 acres.  In FY 2008, VA will transfer 5,689 full-time equivalents from Medical Facilities to Medical Services.  It has been determined that the costs incurred for hospital food service workers, provisions and related supplies are for the direct care of patients which Medical Services is responsible for providing.     

Medical Care Collection Fund (MCCF)

The Balanced Budget Act of 1997, Public Law 105-33, established the VA Medical Care Collections Fund (MCCF), requiring that amounts collected or recovered from third-party payers after June 30, 1997 be deposited into this fund. The MCCF is a depository for collections from third-party insurance, outpatient prescription co-payments and other medical charges and user fees. The funds collected may only be used for providing VA medical care and services and for VA expenses for identification, billing, auditing and collection of amounts owed the Federal government.  The American Legion supported legislation to allow VA to bill, collect, and reinvest third-party reimbursements and co-payments; however, The American Legion adamantly opposes the scoring of MCCF as an offset to the annual discretionary appropriations since the majority of the collected funds come from the treatment of nonservice-connected medical conditions.  Historically, these collection goals far exceed VA’s ability to collect accounts receivable.

In FY 2006, VA collected nearly $2 billion, a significant increase over the $540 million collected in FY 2001. VA’s ability to capture these funds is critical to its ability to provide quality and timely care to veterans.  Miscalculations of VA required funding levels results in real budgetary shortfall.  Seeking an annual emergency supplemental is not the most cost-effective means of funding the nation’s model health care delivery system.

Government Accountability Office (GAO) reports have described continuing problems in VHA's ability to capture insurance data in a timely and correct manner and raised concerns about VHA's ability to maximize its third-party collections. At three medical centers visited, GAO found an inability to verify insurance, accepting partial payment as full, inconsistent compliance with collections follow-up, insufficient documentation by VA physicians, insufficient automation and a shortage of qualified billing coders were key deficiencies contributing to the shortfalls. VA should implement all available remedies to maximize its collections of accounts receivable.

The American Legion opposes offsetting annual VA discretionary funding by the arbitrarily set MCCF goal, especially since VA is prohibited from collecting any third-party reimbursements from the nation’s largest Federally mandated, health insurer -- Medicare.

Medicare Reimbursement

As do most American workers, veterans pay into the Medicare system without choice throughout their working lives, including active-duty. A portion of each earned dollar is allocated to the Medicare Trust Fund and although veterans must pay into the Medicare system, VA is prohibited from collecting any Medicare reimbursements for the treatment of allowable, nonservice-connected medical conditions. This prohibition constitutes a multi-billion dollar annual subsidy to the Medicare Trust Fund. The American Legion does not agree with this policy and supports Medicare reimbursement for VHA for the treatment of allowable, nonservice-connected medical conditions of allowable enrolled Medicare-eligible veterans. 

As a minimum, VA should receive credit for saving the Centers for Medicare and Medicaid Services billions of dollars in annual mandatory appropriations.


The American Legion believes that VA’s focus in research should remain on understanding and improving treatment for conditions that are unique to veterans.  The Global War on Terrorism is predicted to last at least two more decades.  Service members are surviving catastrophically disabling blast injuries in Iraq, Afghanistan and elsewhere due to the superior armor they are wearing in the combat theater and the timely access to quality triage.  The unique injuries sustained by the new generation of veterans clearly demands particular attention.  There have been reported problems of VA not having the state-of-the-art prostheses, like DoD, and that the fitting of the prostheses for women has presented problems due to their smaller stature. 

In addition, The American Legion supports adequate funding for other VA research activities, including basic biomedical research as well as bench-to-bedside projects. Congress and the Administration should encourage acceleration in the development and initiation of needed research on conditions that significantly affect veterans - such as prostate cancer, addictive disorders, trauma and wound healing, post-traumatic stress disorder, rehabilitation, and others jointly with DoD, the National Institutes of Health (NIH), other Federal agencies, and academic institutions.

The American Legion recommends $472 million for Medical and Prosthetics Research in FY 2008, $61 million more than the President’s budget request of $411 million.


Major Construction

Over the past several years, Congress has kept a tight hold on the purse strings that control the funding needs for the construction program within VA.  The hold out, presumably, is the development of a coherent national plan that will define the infrastructure VA will need in the decades to come.  VA has developed that plan and it is CARES.  The CARES process identified more than 100 major construction projects in 37 states, the District of Columbia, and Puerto Rico.  Construction projects are categorized as major if the estimated cost is over $7 million.  Now that VA has a plan to deliver health care through the year 2022, it is up to Congress to provide adequate funds.  The CARES plan calls for, among other things, the construction of new hospitals in Orlando and Las Vegas and replacement facilities in Louisville and Denver for a total cost estimate of well over $1 billion alone for these four facilities.  VA has not had this type of progressive construction agenda in decades.  Major construction money can be significant and proper utilization of funds must be well planned out.  The American Legion is pleased to see six medical facility projects (Pittsburgh, Denver, Orlando, Las Vegas, Syracuse, and Lee County, FL) included in this budget request.

In addition to the cost of the proposed new facilities are the many construction issues that are virtually “put on hold” for the past several years due to inadequate funding and the moratorium placed on construction spending by the CARES process.  One of the most glaring shortfalls is the neglect of the buildings sorely in need of seismic correction.  This is an issue of safety.  Hurricane Katrina taught a very real lesson on the unacceptable consequences of procrastination.  The delivery of health care in unsafe buildings cannot be tolerated and funds must be allocated to not only construct the new facilities, but also to pay for much-needed upgrades at existing facilities.  Gambling with the lives of veterans, their families and VA employees is absolutely unacceptable.

The American Legion believes that VA has effectively shepherded the CARES process to its current state by developing the blueprint for the future delivery of VA health care – it is now time for Congress to do the same and adequately fund the implementation of this comprehensive and crucial undertaking.

The American Legion recommends $1.3 billion for Major Construction in FY 2008, $573 million more than the President’s budget request of $727 million to fund more pending “life-safety” projects.

Minor Construction

VA’s minor construction program has suffered significant neglect over the past several years as well. The requirement to maintain the infrastructure of VA’s buildings is no small task. Because the buildings are old, renovations, relocations and expansions are quite common.  When combined with the added cost of the CARES program recommendations, it is easy to see that a major increase over the previous funding level is crucial and well overdue.

The American Legion recommends $279 million for Minor Construction in FY 2008, $46 million more than the President’s budget request of $233 million to address more CARES proposal minor construction projects.

Capital Asset Realignment for Enhanced Services (CARES)

In March 1999, GAO published a report on VA’s need to improve capital asset planning and budgeting.  GAO estimated that over the next few years, VA could spend one of every four of its health care dollars operating, maintaining, and improving capital assets at its national major delivery locations, including 4,700 buildings and 18,000 acres of land nationwide.

Recommendations stemming from the report included the development of asset-restructuring plans for all markets to guide future investment decision-making, among other initiatives.   VA’s answer to GAO and Congress was the initiation and development of the Capital Asset Realignment for Enhanced Services (CARES) program.

The CARES initiative is a blueprint for the future of VHA - a fluid work in progress, in constant need of reassessment.  In May 2004, the long awaited final CARES decision was released.  The decision directed VHA to conduct 18 feasibility studies at those health care delivery sites where final decisions could not be made due to inaccurate and incomplete information.  VHA contracted Pricewaterhouse Cooper (PwC) to develop a broad range of viable options and, in turn, develop business plans based on a limited number of selected options.  To help develop those options and to ensure stakeholder input, then-VA Secretary Principi constituted the Local Advisory Panels (LAPs), which are made up of local stakeholders.  The final decision on which business plan option will be implemented for each site lies with the Secretary of Veterans Affairs. 

The American Legion is dismayed over the slow progress in the LAP process and the CARES initiative overall.  Both Stage I and Stage II of the process include two scheduled LAP meetings at each of the sites being studied with the whole process concluding on or about February 2006. 

It wasn’t until April 2006, after nearly a seven-month hiatus, that Secretary Nicholson announced the continuation of the services at Big Spring, Texas, and like all the other sites, has only been through Stage I.  Seven months of silence is no way to reassure the veterans’ community that the process is alive and well.

The American Legion continues to express concern over the apparent short-circuiting of the LAPs and the silencing of the stakeholders.  In an effort to provide a tangible voice for the frustrations expressed by veterans affected by the delay in CARES funding, The American Legion has recently produced a publication entitled CARES Dead or Alive?  This seven-part series of articles provides a candid view of how the absence of CARES-promised facilities has impacted veterans and the challenges they face when seeking care.  The American Legion intends to hold accountable those who are entrusted to provide the best health care services to the most deserving population – the nation’s veterans.

Upon conclusion of the initial CARES process, then-Secretary Principi called for a “billion dollars a year for the next seven years” to implement CARES.  The American Legion continues to support that recommendation and encourages VA and Congress to “move out” with focused intent.


Since 1984, nearly all planning for VA inpatient nursing home care has revolved around State Veterans’ Homes and contracts with public and private nursing homes. The reason for this is obvious; VA paid a per diem of $59.48 for each veteran it placed in State Veterans’ Homes, compared to the $354 VA pays to maintain a veteran for one day in its own nursing home care units.

Under the provisions of title 38, United States Code, VA is authorized to make payments to states to assist in the construction and maintenance of State Veterans’ Homes. Today, there are 109 State Veterans’ Homes in 47 states with over 23,000 beds providing nursing home, hospital, and domiciliary care. Grants for Construction of State Extended Care Facilities provide funding for 65 percent of the total cost of building new veterans homes. Recognizing the growing long-term health care needs of older veterans, it is essential that the State Veterans’ Home Program be maintained as a viable and important alternative health care provider to the VA system. The American Legion opposes any attempts to place moratoria on new State Veterans’ Home construction grants. State authorizing legislation has been enacted and state funds have been committed. The West Los Angeles State Veterans’ Home, alone, is a $125 million project. Delaying this and other projects could result in cost overruns from increasing building materials costs and may result in states deciding to cancel these much–needed facilities.

The American Legion supports:

  • increasing the amount of authorized per diem payments to 50 percent for nursing home and domiciliary care provided to veterans in State Veterans’ Homes;
  • the provision of prescription drugs and over-the-counter medications to State Veterans’ Homes Aid and Attendance patients along with the payment of authorized per diem to State Veterans’ Homes; and
  • allowing for full reimbursement of nursing home care to 70 percent service-connected veterans or higher, if the veteran resides in a State Veterans’ Home.

The American Legion recommends $250million for the State Extended Care Facility Construction Grants Program in FY 2008, $165 million more than the President’s budget request.  This additional funding will address more pending life-safety projects and new construction projects.


Historically, VA’s Long-Term Care (LTC) has been the subject of discussion and legislation for nearly two decades.  In a landmark July 1984 study, Caring for the Older Veteran, it was predicted that a wave of elderly veterans had the potential to overwhelm VA’s long-term care capacity.  Further, the recommendations of the Federal Advisory Committee on the Future of Long-Term Care in its 1998 report VA Long-Term Care at the Crossroads, made recommendations that serve as the foundation for VA’s national strategy to revitalize and reengineer long-term care services.  It is now 2006 and that wave of veterans has arrived.

Additionally, Public Law 106-117, the Millennium Act, enacted in November 1999, required VA to continue to ensure 1998 levels of extended care services (defined as VA nursing home care, VA domiciliary, VA home-based primary care, and VA adult day health care) in its facilities.  Yet, VA has continually failed to maintain the 1998 bed levels mandated by law. 

VA’s inability to adequately address the long-term care problem facing the agency was most notable during the CARES process.  The planning for the long-term care mission, one of the major services VA provides to veterans, was not even addressed in the CARES initiative.  That CARES initiative is touted as the most comprehensive analysis of VA’s health care infrastructure that has ever been conducted.

Incredibly, despite 20 years of forewarning, the CARES Commission report to the VA Secretary states that VA has yet to develop a long-term care strategic plan with well-articulated policies that address the issues of access and integrated planning for the long-term care of seriously mentally ill veterans.  The Commission also reported that VA had not yet developed a consistent rationale for the placement of long-term care units.  It was not for the lack of prior studies that VA has never had a coordinated long-term care strategy.  The Secretary’s CARES decision agreed with the Commission and directed VHA to develop a strategic plan, taking into consideration all of the complexities involved in providing such care across the VA system.

The American Legion supports the publishing and implementation of a long-term care strategic plan that addresses the rising long-term care needs of America’s veterans.  We are, however, disappointed that it has now been over two years since the CARES decision and no plan has been published.

It is vital that VA meet the long-term care requirements of the Millennium Health Care Act and we urge this Committee to support adequate funding for VA to meet the long-term care needs of America’s Veterans.  The American Legion supports the President’s $4.6 billion funding recommendation for FY 2008.


Mr. Chairman and Members of the Committee, The American Legion appreciates the strong relationship we have developed with this Committee. With increasing military commitments worldwide, it is important that we work together to ensure that the services and programs offered through VA are available to the new generation of American service members who will soon return home.  You have the power to ensure that their sacrifices are indeed honored with the thanks of a grateful nation.

Thank you for allowing me the opportunity to present the views of The American Legion to you today.