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Carl Blake, National Legislative Director, Paralyzed Veterans of America

Chairman Miller, Ranking Member Filner, and members of the Committee, Paralyzed Veterans of America (PVA) is pleased to be here today to discuss the ongoing debate about deficit and debt reduction and how that might affect the Department of Veterans Affairs (VA).  This Committee has expressed an interest in this issue since the beginning of the year.  In fact, as you know, PVA, along with AMVETS, Disabled American Veterans, The American Legion, and Veterans of Foreign Wars, addressed this issue in a letter provided to the Committee in April 2011.  Today, we will address the various issues that were outlined in our letter to the Committee.  Additionally, we will address the larger budget and appropriations process and ongoing activities within the VA related to this process. 

Before discussing the ideas put forth by the five veterans service organizations represented here today, I would like to focus my comments on the current status of the budget and appropriations process.  Once again, Congress has failed to fulfill its obligations to complete work on appropriations bills funding all federal departments and agencies, including the VA, by the start of the new fiscal year on October 1, 2011.  Fortunately, as has become the new normal, last year the enactment of advance appropriations shielded the VA health-care system from the political wrangling and legislative deadlock.  However, the larger VA system is still negatively affected by the incomplete appropriations work.  VA still faces the daunting task of meeting ever-increasing health-care demand as well as demand for benefits and other services.

Meanwhile, the VA is operating based on the parameters of P.L. 112-36, the “Continuing Appropriations Act for FY 2012.”  As we understand it, the VA has implemented an across-the-board reduction in all program spending of approximately 1.5 percent.  As you know, one of the main reasons that Congress passed, and the President signed, legislation creating advance appropriations was precisely to allow the VA health care system to be able to function efficiently and without interruptions caused by budget showdowns and stop-gap continuing resolutions.  That is why Congress included a full year FY 2012 advance appropriations for VA medical care in P.L. 112-10, the “Full Year Continuing Appropriations Act for FY 2011,” passed in April 2011.  For this legislation to be superseded or misinterpreted by short term CRs and result in a reduction of VA health care funding that was already approved is absolutely outrageous.

Moreover, we are particularly concerned about steps the VA has taken in recent years to generate resources to meet ever-growing demand on the VA health care system.  In fact, the FY 2012 and FY 2013 advance appropriation budget proposal released by the Administration earlier this year includes “management improvements,” a popular gimmick used by previous Administrations to generate savings and offset the growing costs to deliver care.  Unfortunately, these savings were often never realized leaving the VA short of necessary funding to address ever-growing demand on the health care system.  We believe that continued pressure to reduce federal spending will only lead to greater reliance on gimmicks and false assumptions to generate funding.  In fact, the Government Accountability Office (GAO) outlined its concerns with this budget accounting technique in a report released to the House and Senate Committees on Veterans’ Affairs in June 2011.  In its report, GAO states:

If the estimated savings for fiscal years 2012 and 2013 do not materialize and VA receives appropriations in the amount requested by the President, VA may have to make difficult tradeoffs to manage within the resources provided.[1]

This observation reflects the real possibility that exists should VA health care, as well as other programs funded through the discretionary process, be subject to spending reductions. 

And yet, we are here today to further discuss savings that can be realized within the VA.  As we outlined in our letter to the Committee earlier this year, the veterans service organizations are not so naïve as to think that cost-savings cannot be found within the VA, but the question remains:  “To what end?”  The context of this hearing is to identify savings within the VA that can be presumably returned to the Treasury for deficit and debt reduction.  However, we believe the VA is already failing to meet the demands being placed on its health care and benefits systems.  We would argue that any savings realized by the VA should be used to fill gaps in services now or be immediately reinvested into the system to make it function more efficiently and effectively.  This is especially true when discussing the maintenance and modernization of the infrastructure necessary to deliver the benefits and services authorized under current law. 

In response to your budget hearing questions posed after the release of the Administration’s budget request in February about “savings” and “waste” within VA, we presented our shared views on the need for Congress to conduct aggressive oversight of federal veterans’ programs and services to ensure that they are providing maximum value to our nation’s veterans.  Like you, we are committed to working collaboratively to identify areas of inefficiency, duplication or waste so that the resources provided by Congress to the VA are effectively and efficiently used to deliver the benefits and services due to our nation’s veterans.  However, to simply cut spending across-the-board, in the absence of detailed justifications or evidence of savings, will likely result in the loss of accessibility, quality and safety of the services veterans depend on, rather than true deficit reduction.  We believe such an approach will likely lead to additional, unnecessary and avoidable spending to “fix” problems created by underfunding essential services for veterans.

Within this context, we have worked together to identify specific areas throughout VA where we believe the Committee should focus its attention in efforts to find inefficiency, duplication and waste.  Many of our ideas are already on the Committee’s oversight agenda.  My comments will focus on the issues identified in our joint letter targeted at the administration of the VA and the health care system. 

Growth of General Administration

In recent years, increased scrutiny has been placed upon the administrative sections of the VA, most notably on General Administration.  The VA’s General Administration budget request includes funding for the Office of the Secretary, the Board of Veterans’ Appeals, the General Counsel, and the Offices of Management, Human Resources, Policy and Planning, Operations and Security, Public and Intergovernmental Affairs, Congressional and Legislative Affairs, and Acquisitions, Logistics, and Construction.  In FY 2012, the Administration recommended an 11.3 percent increase in funding for its General Administration accounts, the largest account increase within the VA.  As we expressed, and as the Committee likewise emphasized, during the hearing held in conjunction with the release of the FY 2012 Budget Request in February, we have serious concerns that rising VA Central Office (VACO) management budgets and expanding personnel comprise a significant portion of FY 2012 budget growth.  In fact, it was particularly troubling to our organizations that the Administration requested a considerable increase in funding for General Administration while simultaneously requesting a decrease in funding for the Veterans Benefits Administration

The scale of the increases sought in General Administration do not appear reasonable  and we have concerns about whether such bureaucratic growth is necessary during a time when veterans face delays in accessing medical care and proper claims adjudication.  However, we would like to impress upon the Committee that some of the changes to administrative funding in the VA are the result of new requirements and programs authorized by Congress.  It is not surprising that the VA might choose to direct more funding to its administrative functions in order to respond to the actions of Congress.  Ultimately, when budgets are limited, it is essential that every penny reach the veteran at the ground level.  We urge this Committee to scrutinize the General Administration account, including travel and meeting costs, and to limit funding increases only where necessary, and to redirect these funds to the services and programs that immediately impact veterans.  Moreover, it is imperative that the Committee consider the ramifications of any new programs authorized or requirements placed upon the VA.  

Size of VISN Administrations

Similarly, we are concerned about the size and growth of the VISN (Veterans Integrated Service Networks) bureaucracies within the Veterans Health Administration (VHA).  When this new organizational model was developed, the plan called for VISNs to employ a small number of managers and support staff, perhaps a dozen or so, and any additional expertise needed would come from existing personnel at medical centers and other existing facilities.  Today, however, some VISNs employ hundreds of administrative personnel and have built enormous buildings to serve as their permanent headquarters. 

We understand that VA leadership is beginning to take steps that will better align the VISN administrative structure with the duties and responsibilities placed upon those offices.  However, we hope that as the VA reorganizes its personnel alignment at the VISN level that these changes do not translate to simply administrative staff at a different location.  Any change in VISN organization should have quality, timely health care delivery as its priority.  Ultimately, while we believe there is certainly value in the regional network model that VHA employs, we urge the Committee to carefully examine the growth of VISNs and the increasing share of the budget that they currently consume. 

Funding “Hold Back” at VACO and VISNs

Related to concerns about VACO and VISN growth is the manner in which Congressionally-appropriated funds for medical care are distributed to the field.  In particular, we have concerns about the practice of “hold back”, by which VACO or VISNs may withhold medical care appropriations from being distributed to facilities as directed by the Veterans Equitable Resource Allocation (VERA) system.  VERA determines the level of funding each facility should receive annually based upon the quantity and value of services provided in prior years, relative to the amount of medical care appropriations in the current budget.  However, it has become a common practice that VACO “holds back” a significant amount of this funding and retains it to be distributed as it determines for special programs or projects, or to meet contingencies that may arise throughout the year.  Similarly, VISNs “hold back” portions of the VERA funding they receive to fund their operations and for other programs and projects that they manage. 

In fact, as we have already explained in this testimony, the VA is currently holding back approximately 1.5 percent of the advance appropriations (as well as other VA funding) for health care as a result of its interpretation of the current “Continuing Resolution.”  Preventing funds from being disbursed to the field ultimately diminishes the care being provided.  As we have already testified, all of our organizations have received credible reports from VHA facilities across the country in recent years that despite significant year-to-year increases for VA medical care, local facilities received only small or no increases. 

This is particularly troublesome when we continue to hear about funding shortfalls occurring at medical centers around the country.  Likewise, there continue to be reports everyday of the VA falling short in provision of various health care services.  In fact, The New York Times recently reported on a survey of VA mental health professionals in an article on October 24, 2011: 

Only 29 percent of respondents—272 psychologists, psychiatrists, nurses and social workers at dozens of hospitals and clinics—said their workplace had enough staff to meet demand.  Nearly 40 percent said they could not schedule an appointment for a new patient within the 2-week window the veterans department requires.  Nearly 70 percent said they lacked enough space.  And nearly half said some patients were being denied care because no appointments were available outside regular office hours.

We regularly hear reports of hiring freezes that seem inconsistent with the growth of VA’s medical care appropriations.  Several VA medical center (VAMC) directors have reported budget shortfalls that would preclude them from moving forward with hiring.  In fact, the American Federation of Government Employees (AFGE) testified earlier this year that in the VAMC in Delaware, budget shortfalls resulted in leadership leaving beds empty in emergency rooms and therefore limiting the ability to provide necessary care to the community’s veterans.  Last fall, the Director of the Indianapolis VAMC, in a newsletter to his staff, informed them that the facility expected to be $28 million short of the resources required for FY 2011; this despite VA having received a significant funding increase through advance appropriations.  And yet, the VACO response has been that directors “want” more money than they “need.”  We would beg to differ with this assertion.  We urge the Committee to examine how VA “holds back” medical care appropriations from being distributed through VERA, how VISNs do similar “hold backs,” and whether such practices are properly using medical care funding, including focusing on the growth of administrative personnel and “special projects.”

Additionally, we must reemphasize that often the VA is forced to withhold funding to VISN and local levels in order to address new program requirements created through Congressional authorization. 

SES Bonuses

Another area that has drawn significant scrutiny in recent years is the distribution of bonuses to the Senior Executive Service (SES) employees at a time when there are serious questions about management performance, particularly in an environment where federal funding is constrained.  For example, last year the Veterans Benefits Administration (VBA) distributed $417,152 in bonuses to 30 SES employees while veterans wait interminably long periods to receive their proper disability benefits.  During 2010, the backlog of compensation and pension entitlement claims pending over 125 days (VBA’s standard) rose from just less than 180,000 to over 290,000 claims.  Furthermore, a March 2010 GAO report found that accuracy as noted by VBA’s own STAR program had not increased, but fallen from 86 percent accuracy to below 84 percent accuracy.  When every metric of VBA's performance drops, it appears unreasonable that management should be rewarded.

Given that the VA’s workforce has dealt with a pay freeze for all federal employees for the last two years, the payment of bonuses seems completely unjustified.  Overall, focused solely on bonuses paid to the SES employees, last year VA paid out over $3.4 million dollars to 238 SES employees with an average SES Performance Bonus exceeding $14,000.  This is nearly half of the Bureau of Labor Statistics estimate of the average American salary of $32,708 for 2010. 

We understand that executive bonuses serve an important purpose.  In order for the VA to be competitive in the marketplace for senior executive leadership, it must be able to provide financial incentives to candidates and employees.  However, given the tight fiscal situation facing the VA, rather than taking $3.4 million dollars to reward senior executives of VA, we believe this funding might be better directed to ensure essential programs are funded to assist those who have fought to defend our nation.  We urge Congress to scrutinize the bonus practices within VA, particularly while a federal pay freeze is in effect.  Additionally, we believe Congress should not limit its scrutiny of SES bonuses to the VA, but to all other federal agencies which you have oversight authority over in other committees. 

Care Coordination for VA Fee-Based Care

Another area we urge the Committee to address is the lack of coordination of non-VA purchased care and the process of referring veterans to local providers.  A veteran who is approved for fee-based care is not currently provided a list of providers who are certified, licensed, or accredited to practice.  Furthermore, VA does not identify local providers in the veteran patient’s community that accept VA’s payment rate.  VA’s General Counsel has indicated that this “identification and referral” process may not adhere to full and open competition requirements as well as other quality oversight issues.  Failure to adopt such an identification and referral process can lead to veterans being unable to find qualified providers.  It can also lead to VA paying higher rates than necessary because savings could have been achieved if VA would identify and contract with local networks or providers at lower rates.  We urge Congress to conduct oversight of non-VA purchased care to ensure coordination of care and to avoid improper payments. 

Joint Select Committee on Deficit Reduction

Ultimately, discretionary spending in the VA accounts for approximately $62.0 billion.  Of that amount, nearly 90 percent of that funding is directed towards VA medical care programs.  As the Joint Select Committee addresses the possibility of reductions in discretionary spending across the entire federal government, including the VA, it is important to emphasize that any cuts to VA spending will have a direct impact on the delivery of health care services and benefits to veterans and their families. 

We are concerned that in the event that the Joint Select Committee fails to agree to a bipartisan solution or the House or Senate fails to approve the Committee’s recommendations, an automatic “trigger” would occur that would immediately cut an additional $1.2 trillion in federal spending.  The triggers would target two principle areas of the federal budget—national security spending and all other domestic spending.  For FY 2012 and FY 2013, the VA would be included in the national security category along with the Department of Defense, Department of Homeland Security, Department of State, and similar agencies.  While we believe all VA programs are excluded from automatic cuts by P.L. 111-139, The “Statutory Pay-As-You-Go Act of 2010,” questions remain about whether or not VA health care spending in particular could be included in broader discretionary spending reductions.  In fact, Section 11 (Exempt Programs and Activities) of P.L. 111-139 specifically states:

(b) VETERANS PROGRAMS—The following programs shall be exempt from reduction under any order issued under this part:

All programs administered by the Department of Veterans Affairs.”

We believe this language is crystal clear in outlining the priority that Congress has placed on funding for VA programs, even in the face of pressure to reduce the deficit. 

The VA is the best health care provider for veterans.  Providing primary care and specialized health services is an integral component of VA’s core mission and responsibility to veterans.  Across the nation, VA is a model health care provider that has led the way in various areas of medical research, specialized services, and health care technology.  The VA’s unique system of care is one of the nation’s only health care systems that provide developed expertise in a broad continuum of care.  Currently, VHA serves more than 8 million veterans, and provides specialized health care services that include program specific centers for care in the areas of spinal cord injury/disease, blind rehabilitation, traumatic brain injury, prosthetic services, mental health, and war-related polytraumatic injuries.  Such quality and expertise on veterans’ health care cannot be adequately duplicated in the private sector.  Any reduction in spending on VA health care programs would only serve to degrade these critical services. 

In the end, it is easy to forget, that the people who are ultimately affected by wrangling over the budget are the men and women who have served and sacrificed so much for this nation.  We hope that you will consider these men and women as you continue to investigate areas for potential savings within the VA budget. 

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

 Information Required by Rule XI 2(g)(4) of the House of Representatives

Pursuant to Rule XI 2(g)(4) of the House of Representatives, the following information is provided regarding federal grants and contracts.

Fiscal Year 2011 

Court of Appeals for Veterans Claims, administered by the Legal Services Corporation — National Veterans Legal Services Program— $300,000 (estimated).

Fiscal Year 2010 

Court of Appeals for Veterans Claims, administered by the Legal Services Corporation—National Veterans Legal Services Program— $287,992.

 Fiscal Year 2009 

Court of Appeals for Veterans Claims, administered by the Legal Services Corporation — National Veterans Legal Services Program— $296,687.

[1] U.S. Government Accountability Office. (2011, June). GAO-11-622. Veterans’ Health Care Budget Estimate: Changes Were Made in Developing the President’s Budget Request for Fiscal Year 2012 and 2013.