Joseph A. Violante
Mr. Chairman and Members of the Committee:
We appreciate the opportunity to testify today about the funding process for the Department of Veterans Affairs (VA) health care system. I am testifying not only on behalf of Disabled American Veterans (DAV), but also the eight other national veterans service organizations that along with DAV, make up the Partnership for Veterans Health Care Budget Reform: The American Legion; AMVETS; Blinded Veterans Association; Jewish War Veterans of the USA; Military Order of Purple Heart of the U.S.A.; Paralyzed Veterans of America; Veterans of Foreign Wars of the United States; and Vietnam Veterans of America.
We would like to begin by thanking you, Chairman Filner, for holding this hearing, and all the members of the Committee who are here today to examine the critical issues involved. For more than a decade the Partnership has urged Congress to address and reform the basic discretionary appropriations system of funding VA health care. We all agree that the VA health care system must be protected for millions of veterans who depend on it now as their only health care resource and will do so for many decades. Our hope is that today’s hearing becomes a key moment toward achieving that goal.
As we have done several times already this year, the Partnership would like to acknowledge and applaud the support of this Committee, your Appropriations Committee colleagues, and all Members of the House who have elevated VA discretionary health care funding over the past several budget cycles, and in particular for this year’s prospective increase of $6 billion in additional health care funding. But, it can’t have escaped the notice of anyone in this room that the new fiscal year, FY 2008, has already begun and once again we have no new VA appropriation. We are now in the third day of fiscal year 2008 without Congressional approval of a regular appropriation for the Department of Veterans Affairs, which is functioning under a Continuing Resolution. We have been in this same situation – beginning a new fiscal year without new VA appropriations – in 13 of the past 14 years. In fact, over the past five years, the VA appropriation has been late by an average of 105 days, or 3 ½ months.
The lack of an appropriation means that none of the prospective increase for VA health care in FY 2008, that we are all so grateful for, is actually helping veterans today; and we have no idea when it will. None of VA’s VISN Directors, medical center directors, clinic directors, or department heads can use the prospective increase in funding to improve the delivery of health care to veterans today. No new equipment can be procured, no new personnel can be hired, and no services can be expanded until Congress and the President finish their annual job of enacting VA’s appropriation. Even at a time of war, when the obligations to America’s veterans are clearer than ever, we cannot get the VA appropriation on time.
Despite the fact that the prospective increase in funding is supported, or at least not opposed, by both sides of the aisle, both Houses of Congress and both ends of Pennsylvania Avenue, we still have no new appropriation. Is there really any doubt that the system for funding VA health care is broken? Even in budget years – like this one – when the anticipated level of funding for VA health care appears to be sufficient, the lack of timeliness and predictability undermine the overall effect of those gains. That is simply intolerable. We hope that this Committee will agree that Congress can only fully solve this problem by enacting real reform that results in sufficiency, predictability and timeliness of VA health care funding.
The problem is not just about how much, but equally if not more so about how the budget process works. Each year the President proposes a budget and accompanying policies for the federal government. Based on the Views and Estimates reports from authorizing committees, including this Committee in the case of Budget Function 700, Veterans Benefits and Services, submitted to the Budget Committees, that Committee establishes a Concurrent Resolution as a blueprint to execute that budget. The Appropriations Committees allocates funds to carry out the purposes of that budget, guided by the Concurrent Resolution. The whole Congress and the President underwrite this system. It is intended to be a balanced system, and it works well in most cases. But for a variety of reasons, it no longer works in the case of VA health care.
No matter how accurate and precise the formulation methodology for the VA budget may be, the budget process itself impacts the sufficiency of the final outcome. For example, although the Federal budget process is designed to accommodate multiple reviews and approvals, it is cumbersome and long, requiring multiple levels of review (within the Veterans Health Administration; the VA; the Office of Management and Budget; Congressional Authorizing Committees (House and Senate); Congressional Budget Committees (House and Senate) and Congressional Appropriations Committees (House and Senate). At minimum, 21 months are consumed from initial formulation to the start of the fiscal year concerned. The final budget, after numerous tactical adjustments, often lacks a clear strategic direction. Updates in needs estimates during the 21-month span are not encouraged after review officials lock on to their approved levels. Finally, the enactment of the appropriations act is predictably late – as in our current dilemma for this fiscal year – over issues unrelated to VA health care.
Mr. Chairman, as a result of perennially inadequate budget submissions from Presidents of both political parties; annual Continuing Resolutions in lieu of approved appropriations; late arriving appropriations; offsets and across-the-board reductions; and the injection of supplemental and even “dire emergency supplemental” appropriations, VA has been unable to manage or plan the delivery of care to veterans as effectively as it could have done. We challenge this Committee to identify an American business that could operate successfully and remain viable if, in 13 of 14 consecutive years, it had no advance confidence about the level of its projected revenues or the resources it needed to bring a product or service to market, no ability to plan beyond the immediate needs of the institution day-to-day, and no freedom to operate on the basis of known or expected need in the future. In fact, this has been the situation in VA, with 13 out of 14 fiscal years beginning with Continuing Resolutions, including this year, creating a number of conditions that are preventable and avoidable with basic reforms in funding. We believe that no commercial business in America could have withstood the degree of financial insecurity and instability VA has endured over more than a decade. The Partnership believes this situation needn’t exist, and that Congress can make vast improvements with funding reform legislation.
The wars in Iraq and Afghanistan are producing a new generation of wounded, sick and disabled veterans, and some severe types at poly-trauma levels never seen before in warfare. A young American wounded in Central Asia today with brain injury, limb loss, or blindness will need the VA health care system for the remainder of their lives. The goal of the Partnership is to see a long-term solution formed for funding VA health care to guarantee these veterans will have a dependable system for the foreseeable future, not simply next year. Reformation of the whole funding system is essential so federal funds can be secured on a timely basis, allowing VA to manage the delivery of care, and to plan effectively to meet known and predictable needs. In our judgment a change is warranted and long overdue. To establish a stable and viable health care system, any reform must include sufficiency, predictability, and timeliness of VA health care funding.
In past Congresses, we have worked with both chambers’ Veterans’ Affairs Committees to craft legislation that we believed would solve this problem, if enacted. The current version of that bill is H.R. 2514, the Assured Funding for Veterans Health Care Act, introduced on May 24, 2007 by the Honorable Phil Hare of Illinois and 77 original cosponsors, including Chairman Bob Filner and several other Members of the Committee: Representatives Corrine Brown, Stephanie Herseth Sandlin, John Hall, Michael Doyle, Shelley Berkley, Ciro Rodriguez, and Zach Space. The bill now has 85 cosponsors and the Partnership’s full endorsement.
We ask the Committee to consider all the actions Congress has had to take over only the past three years to find and appropriate “extra” funding to fill gaps left from your normal appropriations decisions. Please also consider the Administration’s efforts to explain to Congress why VA found itself deficient by billions of dollars in each of those years. These acknowledgements were often very reluctantly made. In one case, the President was reduced to formally requesting two VA budget amendments from Congress within only a few days of each other.
Some Members have opposed mandatory funding claiming it would be too costly; however, the recent Congressional Research Service report to Congress detailing the running expenditures for the global war on terror since September 11, 2001, revealed that Veterans Affairs-related spending constitutes one percent of the government’s total expenditure since that date. Without question, there is a high cost for war, and caring for our nation’s sick and disabled veterans is part of that continued cost. A report by a researcher at Harvard’s Kennedy School of Government predicted that federal outlays for veterans of the wars in Afghanistan and Iraq would arc between $350 billion and $700 billion over their life expectancies following military service—an amount in addition to what the nation already spends for previous generations of veterans. Thus, it is clear the government will be spending vast sums in the future to care for veterans, to compensate them for their service and sacrifice, but these funds will still only constitute a minute fraction of total homeland security and war spending.
On July 25, the Senate Committee on Veterans’ Affairs held a hearing on VA health care funding, the first hearing of its kind. A number of key witnesses testified at that hearing in addition to the Partnership, including the former Chairman of this Committee, the Honorable Christopher H. Smith; the former Under Secretary for Health, the Honorable Kenneth W. Kizer; four retired VA medical center directors; Mr. J. David Cox, National Secretary-Treasurer of the American Federation of Government Employees (VA’s largest employee union); and, Dr. Ewe Reinhardt, a distinguished professor of economics at Princeton University. All the witnesses urged the Senate to reform funding for VA health care. In particular, we want to call your attention to Dr. Reinhardt’s statement on VA health care and its place in American public policy. Dr. Reinhardt made persuasive arguments for the propositions that the VA system can be sustained and is affordable, and that it would be more efficient if funded through a mandatory, rather than discretionary system.
THE PARTNERSHIP CALLS FOR ACTION
Mr. Chairman, from today’s hearing, after considering the testimony of witnesses here as well as those who addressed the Senate Committee, we ask the Committee in your fiscal year 2009 Views and Estimates to the Budget Committee that you notify them of your intention to report legislation creating a mandatory and guaranteed funding system for VA health care in 2009, and that you recommend that the Budget reserve sufficient funds to make that seminal change next year. If the Committee chooses a different method for effecting this change than offered in H.R. 2514, we will examine that proposal to determine whether it meets our three essential standards for reform: sufficiency, predictability, and timeliness of funding for VA health care. If that alternative fully meets those standards, our organizations will enthusiastically support it.
HISTORICAL PERSPECTIVE AND FURTHER JUSTIFICATION FOR REFORM
In 1996, Congress passed the Veterans’ Health Care Eligibility Reform Act of 1996, Public Law 104-262, which changed eligibility requirements and that paved the way for improved health care for veterans. Greater numbers of veterans became eligible for health care benefits as a result of this Act. As P.L. 104-262 was moving through Congress, Dr. Kenneth W. Kizer, the then-Under Secretary of Health of the Veterans Heath Administration (VHA), submitted a major administrative reorganization plan to Congress under Title 38 United States Code, Chapter 5, Section 510(b). Since Congress expressed no disapproval of this proposal, this plan created 22 Veterans Integrated Service Networks (VISNs)  to replace the VA’s four regional management divisions.
The decentralization of operations was seen as essential to prepare VA to function more effectively in manageable and integrated delivery networks—networks that would be more patient-centric and would rely on primary and preventive care rather than more intensive modes. Accentuated by authorities provided by P.L. 104-262, the VA health care system thereabout underwent significant reforms from an episodic and bed-reliant system of care, to one in which veterans were enrolled and could expect continuity of care and health maintenance, including preventive services. The shift in focus from medical intervention in diseases afflicting veterans, to primary care to maintain their health, reflected a broader trend co-occurring in America’s private health care sector. The shift allowed VA to close thousands of unnecessary hospital beds while establishing new facilities called Community-Based Outpatient Clinics (CBOCs) to provide more veterans more convenient access to care.
With encouragement from many Members of Congress as well as your Committee and national veterans service organizations, the VISNs outreached to veterans to enroll in a reformed VA health care system. As a result, millions of veterans enrolled in VA health care for the first time in their lives. A decade later, VA health care is a remarkable success story of how to transform a troubled and overburdened system into a state-of-the-art provider. Harvard University’s School of Public Health and the National Quality Research Center at the University of Michigan have both scored VA at the very top of American health care systems in terms of patient safety and medical outcomes. Mainstream publications, including Time, Newsweek, US News and World Report, Business Week, The Wall Street Journal, New York Times, Washington Post, Fortune, and the Washington Monthly, have all written major stories detailing VA’s transformation over the past decade. Their investigations have confirmed that VA today is the highest quality, lowest cost health care system in the Nation.
While Congress intended veterans to be able to secure an improved continuum of care, P.L. 104-262 underscored that VA health care operations would still be dependent upon appropriated resources. As early as 1993, the Partnership urged Congress to “guarantee” funding for VA health care if Congress decided to reform eligibility for that care. Unlike other health care benefits available to non-VA beneficiaries, this VA benefit is not “guaranteed.” This has probably been the single most significant problem for VA during the past decade and the reason we appear here today. In sum, as a result of eligibility reform, veterans have been rewarded with a more integrated VA health care system, a more comprehensive health care benefit and high quality, safe health care services. However, gaining and keeping access to that system is a continuing dilemma due to the uncertainty of duration of an individual’s enrollment, VA’s hobbled planning from lack of secured and predictable funding; budgetary gimmicks employed by VA and Office of Management and Budget (OMB) officials. Additionally, because of the Administration’s policies, VA officials are constrained from publicly stating their true needs.
Most importantly, eligibility reform eliminated fragmented care provisions in the statutes and enabled VA to appropriately streamline care for its veteran patients. It eliminated a tangled web of rules and internal VA policies that made individual health care eligibility decisions bureaucratic, complicated, confusing, and harmful to the health of veterans who depended on VA to meet their needs. Reforming eligibility corrected the artificial inefficiencies of the system, allowed it to treat more veterans, and enabled it to preserve the system, primarily for service-connected veterans, low income veterans and veterans with special needs. We believe that goal was, and still is, a sound one. Without question VA’s success has led to unprecedented growth in the system, but we disagree with some who allege that eligibility reform created “the current funding problem” by enticing too many veterans to enroll. In our judgment, the problem is not eligibility reform, but inadequate funding through the discretionary appropriations process.
PRESSURE BUILDS ON THE SYSTEM
In 2002 VA placed a moratorium on its facilities’ marketing and outreach activities to veterans and determined there was a need to give the most severely service-connected disabled veterans a priority for care. This was necessitated by VA’s realization that demand was seriously out-pacing available funding and other resources, and service-connected veterans were being pushed aside as VA’s highest priority. On January 17, 2003, the Secretary announced a “temporary” exclusion from enrollment of veterans whose income exceeds geographically determined thresholds and who were not enrolled before that date. This directive denied health care access to 164,000 so-called “Priority Group 8” (PG8) veterans in the first year alone following that decision. To date over one million veterans have been denied access to VA health care under that policy. The then-Ranking Member of the this Committee was correct when, in response to the Secretary’s decision to restrict enrollments of these veterans he stated, “The problem isn’t that veterans are seeking health care from their health care system—it’s that the federal government is not making the resources available to address their needs.” We agree.
Mr. Chairman, the decision to exclude PG8 veterans from VA health care enrollment at the beginning of 2003 also must be taken into context. While VA was in the midst of unprecedented systemic—even revolutionary, change, Congress passed the Balanced Budget Act (BBA) of 1997, Public Law 105-33. That Act was intended to flat-line domestic discretionary federal spending, across the board, including funding for VA health care. As the effects of the BBA took hold during the three-year life of that law, VA’s financial situation shifted from challenging to that of crisis. In 2000, at the urgings of both this Committee and your Senate counterpart, Congress relented and provided VA health care a supplemental appropriation of $1.7 billion. Nevertheless, the three-year funding drought built up conditions that could not easily be surmounted by one infusion of new funding. VA began queuing new veteran enrollees, the waiting list lengthened and rationing of care was commonly reported. Eventually, by 2002, the list of veterans waiting more than six months for their first primary care appointment inched toward 300,000 nationwide. Given an Administration that would not permit additional funding to stem the waiting list buildup, then-VA Secretary Principi, using the policy available to him by law, closed new enrollments of PG8 veterans and set out a plan to get the waiting list under control.
Another consideration important to this discussion is that the BBA also authorized a ten-site “Medicare subvention” demonstration project within the Department of Defense (DoD) health care system as a precursor to the advent of Medicare subvention in VA. This program eventually failed in DoD and, later known as “VA+Choice Medicare” and later still, “VAAdvantage,” never got off the ground due to opposition from the Office of Management and Budget (OMB) and the Department of Health and Human Services. This failure meant that no Medicare funds would ever be received by VA for the care it had been providing (and is still providing) to fully Medicare-eligible veterans receiving care as enrolled VA patients, at a huge cost avoidance for the Medicare trust fund. At least 55 percent of VA’s enrolled population is concurrently eligible for Medicare coverage. Many PG8 veterans, in and out of VA, would be Medicare eligible as well.
Congress must also consider the implications of the anticipated policy change that would extend eligibility for all OEF/OIF veterans to access VA health care services from two to five years. In addition, changes in the weapons of warfare and advances in battlefield medicine have resulted in significant numbers of surviving, but traumatically wounded, servicemembers. The demands that are placing, and will continue to place on the VA system, including the need for expanded polytrauma treatment and rehabilitation programs, must be considered.
PRESIDENT’S TASK FORCE
An additional perspective to consider with respect to your addressing funding reform is that of the President’s Task Force to Improve Health Care Delivery for Our Nation’s Veterans (PTF). Dr. Gail Wilensky, Co-Chair of that task force, testified before the House Committee on Veterans’ Affairs on March 26, 2003, two months following the exclusion of PG8 veterans from VA enrollment. She stated:
“ It was clear to us that, although there has been a historical gap between demand for VA care and the funding available in any given year to meet that demand, the current mismatch is far greater, for a variety of reasons, and its impact potentially far more detrimental, both to VA’s ability to furnish high quality care and to the support that the system needs from those it serves and their elected representatives.
* * *
Although we did not reach agreement on one issue in the mismatch area – that is, the status of veterans in Category 8, those veterans with no service-connected conditions with incomes above the geographically adjusted means test threshold – we were unanimous as to what should be the situation for veterans in Categories 1 through 7, those veterans with service-connected conditions or with incomes below the income threshold.”
While the Partnership supports opening the system to new PG8 veterans who need care, we must surmise based on the above historical recounting and our analysis that the readmission of PG8 veterans to VA, absent a major reformation of VA’s funding system, could stimulate and trigger a new funding crisis in VA health care. We are concerned whether sufficient health professional manpower could be recruited to enable VA to put them into place in an orderly fashion to meet this new demand. Also, VA’s physical space may be insufficient to accommodate the new outpatient visits that PG8 patients would likely generate.
The question about PG8 veterans reenrolling in VA health care is not a question only about them and their needs for health care. It is also a larger question about the sufficiency, predictability and timeliness of the current system of funding VA health care. Until those reforms are enacted to guarantee that on October 1 of each year, VA will have a known budget in hand, the means and methods to spend those funds in accordance with need, and that VA’s budget will be based on a sound methodology, we are concerned about immediate readmission of PG8 veterans.
Mr. Chairman, we have heard over and again a number of reasons as to why converting VA health care to mandatory funding would fail, whether from the bill we recommended or through other models to achieve that goal. We list below some of those criticisms, with our response for your consideration. We hope you will review those issues as you consider this reform.
MYTHS and REALITY
MYTH: Congress would lose oversight over the VA health care system if VA shifted from discretionary to mandatory funding.
REALITY: While funding would be removed from the direct politics, uncertainties, and capriciousness of the annual budget-appropriations process, Congress would retain oversight of VA programs and health care services—as it does with other federal mandatory programs.
Guaranteed funding for VA health care would free members of Congress from their annual budgetary battles to provide more time for them to concentrate on oversight of VA programs and services.
MYTH: Mandatory funding creates an individual entitlement to health care.
REALITY: The Assured Funding for Veterans Health Care Act would shift the current funding for VA health care from discretionary appropriations to mandatory budget status. The Act makes no other changes. It does not expand eligibility for an individual veteran, make changes to the benefits package, or alter VA’s mission.
MYTH: Guaranteed funding would open the VA health care system to all veterans.
REALITY: The Health Care Eligibility Reform Act of 1996 theoretically opened the VA health care system to all 24 million veterans; however, it was never anticipated that all veterans would seek or need VA health care. Most veterans have private health insurance and will likely never elect to use the system. The Secretary is required by law to make an annual enrollment decision based on available resources. This bill would not affect the Secretary’s authority to manage enrollment, but would only ensure the Secretary has sufficient funds to treat those veterans enrolled for VA health care.
MYTH: Guaranteed funding for VA health care would cost too much.
REALITY: Guaranteed funding under the Act would utilize a formula based on the number of enrolled veterans multiplied by the cost per patient, with an annual adjustment for medical inflation to keep pace with costs for medical equipment, supplies, pharmaceuticals and uncontrollable costs such as energy. The Act would ensure that VA receives sufficient resources to treat veterans actually using the system.
MYTH: Veterans in Priority Group 7 and 8 are using up all of VA’s health care resources; and it therefore costs too much to continue to treat these veterans.
REALITY: Among the 7.9 million enrollees in the VA health care system, 2.4 million veterans from Priority Groups 7 and 8 account for only 30 percent of the total enrolled population, but use only 11 percent of VA’s expenditure for all priority groups.
MYTH: The viability of the VA health care system can be maintained even if VA only treats service-connected veterans or the so-called “core group,” Priority Groups 1-6.
REALITY: VA health care should be maintained and priorities given to treat these veterans, since many of the specialized services they need are not available in the private sector. However, to maintain VA, a proper patient case mix and a sufficient number of veterans are needed to ensure the viability of the system for its so-called core users and to preserve specialized programs, while remaining cost effective.
MYTH: Providing guaranteed funding for VA health care will not solve VA’s problems.
REALITY: With guaranteed funding, VA can strategically plan for the short-, medium- and long-term, optimize its assets, achieve greater efficiency and realize savings. VA continues to struggle to provide timely health care services to all veterans seeking care due to insufficient funding, and always uncertain funding beyond the operational year. The guaranteed funding formula in the bill provides a standardized approach in solving the access issue and permitting more rational planning.
MYTH: Veterans health care should be privatized because the system is too big, inefficient, and unresponsive to veterans.
REALITY: VA patients are often elderly, have multiple disabilities, and are chronically ill. They are generally unattractive to the private sector. Also, such patients pose too great an underwriting risk for private insurers and health maintenance or preferred provider organizations. While private sector hospitals have lower administrative costs and operate with profit motives, a number of studies have shown that VA provides high quality care and is more cost-effective care than comparable private sector health care. VA provides a wide range of specialized services, including spinal cord injury and dysfunction care, blind rehabilitation, prosthetics, advanced rehabilitation, post-traumatic stress disorder, mental health, and long-term care. These are at the very heart of VA’s mission. Additionally, VA supplies one-third of all care provided for the chronically mentally ill, and is the largest single source of care for patients with AIDS. Without VA, millions of veterans would be forced to rely on Medicare and Medicaid at substantially greater federal and state expense.
MYTH: Under a mandatory funding program, VA would no longer have an incentive to find efficiencies and to supplement its appropriation with third-party collections.
REALITY: Mandatory funding will provide sufficient resources to ensure high quality health care services when veterans need it. It is not intended to provide excess funding for veterans health care. VA Central Office (VACO) would still be responsible for ensuring local managers are using funds appropriately and efficiently. Network and medical center directors and others would still be required to meet performance standards and third-party collections goals. These checks and balances will help ensure accountability.
In closing, Mr. Chairman and Members of the Committee, we ask for your leadership and commitment to resolve this keystone issue in veterans’ affairs. The long-term solution to VA’s funding problems requires strong leadership from this Committee and this Congress. We urge you, as leaders in veterans’ health and financial policy, to remember the needs of America’s veterans and take action to remedy this serious problem.
Mr. Chairman, we would like to note that all of the member organizations of the Partnership have adopted statements or resolutions urging funding reform in VA health care.
We hope as you debate this crucial matter the Committee will recognize that our organizations are united in our interest in calling for basic budget reform.
This concludes our testimony. Again, the Partnership appreciates the opportunity to present testimony, and we thank the Committee for its continuing support for veterans, especially those who are sick and disabled as a result of serving the Nation.
 The creation of the new VISN’s began in 1995 in anticipation of the passage of the Act.
 “the extent and in the amount provided in advance in appropriations Acts for these purposes. Such language is intended to clarify that these services would continue to depend upon discretionary appropriations.” Taken from the Committee Report (H. Report 104-690) of the P.L. 104-262.)