February 22, 2008

The Honorable Kent Conrad
Chairman 
The Honorable Judd Gregg
Ranking Member        
Committee on the Budget
United States Senate
Washington, DC  20510
 
Dear Chairman Conrad and Ranking Member Gregg: 
        
 Pursuant to Section 301(d) of the Congressional Budget Act of 1974, the Democratic and Independent Members of the Committee on Veterans' Affairs (hereinafter the "Undersigned Members") hereby report to the Committee on the Budget their views and estimates on the Fiscal Year 2009 (hereinafter, "FY09") budget for Function 700 (Veterans' Benefits and Services) and for Function 500 (Education, Training, Employment, and Social Services) programs within the Committee's jurisdiction, including the Court of Appeals for Veterans Claims.  This letter responds to the Committee's obligation to provide recommendations on veterans' programs within its jurisdiction, albeit from the perspective of the Undersigned Members.
  
     I.  SUMMARY

 The Department of Veterans Affairs (VA) requires, at a minimum, $4.577 billion in additional funding in FY09 over FY08 to support its medical care operations.  Our requested medical services increase is $2.562 billion over the Administration's request.  The total required for all of VA's discretionary accounts is $6.614 billion over FY08.

 For the seventh year in a row, the Administration's proposed budget includes a number of legislative proposals designed to generate additional revenue from fees or savings and deter certain categories of veterans from using the VA system.  Just as Congress has done over the past five years, the Undersigned Members unanimously reject each of the following legislative proposals - the increase in prescription drug copayments from $8 to $15 for "middle-income" veterans; the annual enrollment fee of $250 to $750 for veterans whose families make $50,000 a year or more; and eliminating the practice of offsetting VA first-party copayment debts with collections from insurance companies.

 With respect to benefits, we disagree in particular with the discretionary funding request for staffing at the Board of Veterans' Appeals, education and Vocational Rehabilitation and Employment business lines' staffing, and for programs administered by the Department of Labor.
 
 In addition, we believe that the benefit level of several mandatory programs must be increased to quell erosion of the benefits over time.  We also recommend that Filipino veterans finally get recognition for their heroic service during World War II and be given pensions to aid them in their twilight years. 
 
 The projections in the President's budget for discretionary spending in the next 5-10 years are troubling.  The VA health care system would be devastated should the Administration's budget for future years become a reality.  It is our view that veterans, who have sacrificed for this country, are being asked to carry a disproportionate share of the burden to balance the Federal budget.  We believe that the Government can be fiscally responsible and reduce the Federal deficit and debt, without abandoning its commitment to our Nation's veterans. 

 As the Congress continues to debate the conflicts in Iraq and Afghanistan, including the cost of prosecuting those efforts, we must clearly demonstrate our understanding that the cost of war includes the cost of caring for servicemembers, now and in the decades to come. 
 
                II.  DISCRETIONARY ACCOUNT SPENDING 

A.  Medical Services  
 
Policy Proposals

 Prescription Drug Co-payment Increase for Priority 7 and 8 Veterans:  The Undersigned Members oppose the Administration's proposed increase of the prescription drug co-payment from $8 to $15, for projected revenue of $335 million in FY09 and $3.7 billion over 10 years.  Many Priority 7 and 8 veterans - some earning less than $28,500 a year - cannot afford to pay nearly double for needed prescription drugs. 

 Enrollment Fee of $250 to $750 for Priority 7 and 8 Veterans:  The Undersigned Members oppose the Administration's proposed new enrollment fee of $250 for veterans with family incomes between $50,000 and $74,999; $500 for those with family incomes between $75,000 and $99,999; and $750 for those with family incomes over $100,000.  This proposal is projected to generate $129 million in revenue in FY10 and $1.1 billion over 10 years.
 
 Taken together, these two fee increases would be particularly hard on certain categories of veterans.  For example, a family with two veteran wage-earners, each taking an average number of medications and each paying an enrollment fee of $250, would have to pay nearly $3,000 in new out-of-pocket costs for VA care if the prescription drug copayment increase and enrollment fee are enacted.
    
 Offset of First-Party Debt:  The Undersigned Members oppose a proposed change in law that would eliminate the practice of offsetting VA first-party co-payment debts with recoveries from insurance companies.  Many veterans are drawn to VA because of low-cost prescription drugs.  Yet, in most cases, acquiring these drugs requires visits to a specialty care provider.  Furthermore, many of these veterans are elderly and on a fixed income.  While they are not "high-income" by any standard, their incomes are over the VA means-test threshold.  While the current primary care co-payment of $15 is in line with most private insurance companies, VA's specialty care co-payment is $50 per visit.  That amount is high enough to be an immediate disincentive to seeking medical care from VA if it cannot be paid for by third-party insurance.  VA estimates this change would yield $44 million in increased collections in FY09 and $415 million over 10 years.

 The Undersigned Members also oppose the proposal to return revenue from the above new fees to the Treasury, rather than reinvesting the funds in veterans' health care.  That proposal clearly signals that the fees are proposed to address overall deficit reduction and are not intended to support VA health care.

Components of Recommended Increase

1. Current Services (+$1.995 billion)

 Medical care inflation (at an overall rate of 4.63 percent), increases in the costs of goods, and other "uncontrollables" dictate a funding increase of at least $1.434 billion in FY09 simply to maintain the level of current services.  Increased intensity (which encompasses changes in medical care delivery to adjust for more complex care) and utilization of medical services by existing patients also continues to drive costs up as well.  The Administration has requested an additional $534 million in funding in FY09 to meet these latter costs, and we support this request.

2. OEF/OIF Demand and Services (+$742 million)

 inding the ban on Priority 8 veterans would be significantly reduced if the impact of third-party insurance and co-payments for care and prescription drugs were factored in. 
 
4.  New Initiatives (+$579 million)

 The Undersigned Members accept the Administration's proposed "new initiatives".  While we support each of these initiatives, we believe that more can and should be done - especially in the areas of mental health, readjustment counseling, women veterans, personnel enhancements, and rural veterans' access.  The Undersigned Members also support the expansion of many existing initiatives and recommend increases in the specialized services discussed below.

 Mental Health.  The Undersigned Members are very concerned about VA's capacity to meet the mental health needs of returning servicemembers.  For example, while the number of veterans diagnosed with substance abuse problems is increasing, the President's request would cut funds for substance abuse treatment.  Rather than account for growing demand for mental health care services, the budget also projects reductions in inpatient psychiatric and residential care. 

 We believe that VA needs greater resources for mental health services and recommend $377 million in additional funding over FY08 levels.

 This level of funding would ensure funds remain to support expansion of VA's specialized mental health and substance abuse programs; expand VA's capacity to provide inpatient psychiatric and residential care; provide funds to address family-related needs of returning veterans experiencing distress following their reentry into civilian life; support more effective treatment for post-traumatic stress disorder (PTSD); and advance efforts to prevent suicide among veterans.  In addition, the Undersigned Members believe that VA must take a preemptive, proactive approach to assist families dealing with the stresses and challenges caused by servicemembers' deployments to combat zones and their return to civilian life. 

 Rural Access.  The Committee believes that we must continue to modernize VA's beneficiary travel program and bring payments under the program closer in line with today's cost of travel.  The conference report accompanying the Consolidated Appropriations Act of 2008 specified that $125 million of the funds provided for Veterans Medical Services should be used to increase the travel reimbursement rate.  In response to that language, the Secretary of Veterans Affairs recently increased the travel reimbursement rate to 28.5 cents per mile.  While we are pleased with the rate increase - the first one since 1977 - we believe that with rising gas prices, service-connected veterans merit a larger increase.  We recommend that the travel benefit be brought in line with the rate that federal employees are currently paid for their official travel.  The cost of doing so would be an additional $125 million.

 We also note that S. 1233, the proposed "Veterans' Traumatic Brain Injury and Other Health Programs Improvement Act of 2007," includes a provision that would strike a provision in current law that allows the Secretary to raise or lower the deductible for reimbursements in proportion to a change in the mileage rate.  This would have the effect of holding the deductible to $3 per a one-way trip.

 The Office of Rural Health (ORH) continues to play an essential role on improving care for veterans in rural areas.  The resources, education, and support provided by ORH have proven helpful throughout the VA health care system.  Demand for the services and support of ORH is likely to grow, given the high number of National Guard and Reserve deployed in Iraq and Afghanistan in recent years, many of whom returned to homes in rural locations.  S. 1233, currently pending consideration by the full Senate, would require ORH to make a number of reports to Congress on fee-basis health care and on rural outreach efforts.  In light of the greater demands placed on ORH, funding for this office ought to be increased significantly.

The Undersigned Members recommend $10 million over FY08, $9 million more than the President's request for ORH in FY09.

 Vet Centers.  As the conflicts in Iraq and Afghanistan continue, the number of veterans seeking readjustment counseling and related mental health services through Vet Centers will continue to grow.  Experts predict that as many as 30 percent of returning servicemembers may need some kind of mental health treatment - from basic readjustment counseling to care for debilitating PTSD.  A study published on March 1, 2006, in the Journal of the American Medical Association, reported that 35 percent of Iraq veterans accessed mental health care services during their first year at home.  VA's own OIF/OEF Health Care Utilization Report from the last quarter of FY07 cited that 40 percent of those who have already accessed VA health care may have mental disorders of some kind.  Despite an increase in the number of veterans coming to Vet Centers, the budget for the program has remained relatively flat.  We note that legislation to authorize $180 million in funding for Vet Centers, S. 3421, was by passed by Congress and signed into law on December 22, 2006, as Public Law 109-461.

 We recommend that Vet Centers receive a funding increase of $22 million above FY08 to meet that goal.
 
 Homeless Grant and Per Diem Program.  Veterans are disproportionately represented among the homeless population, accounting, according to most estimates, for one in three homeless persons on any given night.  VA has a responsibility to help the roughly 400,000 veterans experiencing homelessness over the course of the year.  VA's Grant and Per Diem program is effective in creating and aiding local shelters as they help our Nation's veterans by providing transitional housing, vocational rehabilitation, and referrals for clinical services. 

 We recommend $23 million in additional resources for this program in FY09 to fully fund it at the $130 million level that was previously authorized by Congress (Public Law 109-461).

 Women Veterans.  Women make up a growing segment of the armed services, and thousands have been deployed to Iraq and Afghanistan.  VA must be prepared to provide services to these servicemembers in appropriate settings when they return.  While some facilities have found innovative solutions to meet the unique needs of women veterans, others are still lagging behind.  The Undersigned Members believe that to adequately serve this growing special population of veterans, additional funding is required.
 
 We recommend an additional $10 million over FY08.

 Personnel - Nurses.  The Undersigned Members are concerned that the Administration has not adequately budgeted for enough physicians and nurses to meet the projected increase in demand for VA medical care in FY09.  The number of physicians, nurses, and all other health professionals currently employed by the Veterans Health Administration (VHA) cannot keep pace with increasing demands on the system.  The Undersigned Members believe that resources in this area must be spent on the hiring of additional clinical staff to better meet demand.  VA faces a competitive market for health care providers, particularly nurses, and must dedicate additional resources to recruit and retain staff.  The Undersigned Members also recommend providing additional funds to support debt relief and scholarship programs for health personnel to promote recruitment and retention efforts.

 The Undersigned Members recommend that an additional $12.482 million be included for these programs, for a total of $40 million in FY09.

5. Medical Facilities

 The Medical Facilities account delineates a specific line of funding for the maintenance and operation of hospitals, nursing homes, domiciliaries, clinics, and all other facilities of the Veterans Health Administration.  The Undersigned Members support the Administration's request of $561 million over FY08, for a total of $4.66 billion.  This amount is $85 million over the recommendation of the Independent Budget for FY09, and the Undersigned Members believe this level of funding is sufficient to keep VA health care facilities in proper condition.

Our overall recommendations [in thousands of dollars] for medical care spending are summarized in the chart below:

Needed Discretionary Revenue Above FY 08 Level (thousands)
  
MEDICAL SERVICES 
Current Services                                              $1,995,000
  
New Initiatives and Program Expansions 
Mental Health                                                 $376,600

Homeless Grant and Per Diem Program             $23,000

OIF/OEF Veterans                                           $742,000

Women Veterans                                           $ 10,000
Personnel                                                     $12,482

Rural Initiatives                                            $135,000

Vet Centers                                                  $22,000

Priority 8s                                                   $700,000

Total Medical Services                                  $4,016,082
  
MEDICAL FACILITIES                                    $561,000
  
Total Recommended For Medical Care           $4,577,082

President's Medical Care Request Over FY08          $2,015,283

Majority Recommendation Vs. Administration              $2,561,799

B.  Proposed Discretionary Spending for FY10-FY13

 For the second year in a row, the Administration's proposed budget for discretionary spending in future fiscal years would devastate VA health care.  The President's budget cuts VA medical care funding for Fiscal Years 2010 through 2013.

 We view the current strategy as one that gives in the first year and cuts heavily thereafter, in order to improve the overall appearance of the President's budget.  A frozen appropriation coupled with cuts in other programs would translate to a reduction of services and benefits.  The Undersigned Members believe that any budget resolution must reverse these cuts in future years.

C.  Medical and Prosthetic Research

 The Administration's proposed FY09 budget for VA research is $442 million, a $38 million cut from the current year level of $480 million.  This sum cannot sustain current research initiatives or provide the program growth necessary to attract and retain quality research personnel.  The Administration's proposal would result in the direct loss of 49 FTE and 294 projects in key areas such as acute and traumatic injury and mental illness.  Increased funding is required to sustain current VA research and development program commitments, and to cover inflationary cost increases associated with these commitments.  VA must be able to continue addressing the special needs of our Nation's veterans, and continue to recruit and retain the highest quality physicians.  We recommend an additional $75 million over the FY08 level for a total funding level of $555 million.

D.  Grants for State Extended Care Facilities

 The State Extended Care Facilities (SECF) grant program assists States in acquiring or constructing State home facilities that intend to provide nursing home care to veterans, as well as in remodeling or converting existing buildings into long-term care facilities.  VA can provide up to 65 percent of the total cost of the project, and the States must provide the remaining share of the cost.
 
 This year again, the Administration proposed a significant reduction in funding for this program, requesting $85 million for SECF grants in FY09.  Congress provided the SECF grant program with $165 million in FY08 - an unprecedented, but very necessary increase.  The Administration's budget would essentially cut this program by $80 million, delaying the many projects that are currently in the queue.  Furthermore, new grant proposals from the States continue to increase, in response to an ever-growing population of veterans in need of long-term care.

 To award an adequate number of new SECF grants in FY09, the Undersigned Members recommend $200 million in total funding for FY09, a $35 million increase above FY08.

E.  Major and Minor Construction

 The Administration requested only $472 million for Major Construction in FY09.  This amounts to a decrease of $488 million from the FY08 funding level, despite the fact that there are currently nine major projects underway that are only partially funded.  The funding shortfall for all nine projects is $2.3 billion.  The Undersigned Members believe that VA must ramp up its construction process and complete work on the projects it has already started.  Total construction costs are continually increasing, and while much of this is due to normal factors in the contracting industry such as cost of materials, the lack of full funding for certain projects has enabled contractors to renegotiate their prices in certain cases.

 In addition, the President's budget includes $5 million for a new land acquisition line item in the Major Construction account.  These funds will be used to purchase land as it becomes available in order to quickly take advanta