For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34063
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Prepared for Members and Committees of Congress
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The Department of Veterans Affairs (VA) provides benefits to veterans who meet certain
eligibility rules. Benefits to veterans range from disability compensation and pensions to hospital
and medical care. The VA provides these benefits through three major operating units: the
Veterans Health Administration (VHA), the Veterans Benefits Administration (VBA), and the
National Cemetery Administration (NCA). The VHA is primarily a direct service provider of
primary care, specialized care, and related medical and social support services to veterans through
the nation's largest integrated health-care system.
On February 5, 2007, the President submitted his FY2008 budget proposal to Congress. The total
amount requested by the Administration for the VHA for FY2008 was $34.6 billion, a 1.93%
increase in funding compared with the FY2007 enacted amount. For FY2008, the Administration
was requesting $27.2 billion for medical services, $3.4 billion for medical administration, $3.6
billion for medical facilities, and $411 million for medical and prosthetic research.
On June 15, 2007, the House passed its version of the Military Construction and Veterans Affairs
Appropriations bill (MILCON-VA appropriations bill) for FY2008 (H.R. 2642, H.Rept. 110-186).
H.R. 2642 provided $37.1 billion for the VHA for FY2008. This amount included $29.0 billion
for medical services, a $1.9 billion (6.9%) increase above the President's request. H.R. 2642 also
included $3.5 billion for medical administration, $69 million above the Administration's request
of $3.4 billion; $4.1 billion for medical facilities, a 14% increase over the President's request; and
$480 million for medical and prosthetic research, a 17% increase over the President's request of
$411 million. H.R. 2642 did not include any bill language authorizing fee increases as requested
by the Administration's budget proposal for the VHA for FY2008.
On September 6, 2007, the Senate passed MILCON-VA appropriations bill for FY2008 (H.R.
2642, S.Rept. 110-85) with an amendment. H.R. 2642, as passed by the Senate, provided a total
of $37.2 billion for the VHA. This amount included $29.1 billion for medical services--a $3.2
billion (12.3%) increase over the FY2007 enacted amount and $1.9 billion over the FY2008
budget request--and $3.5 billion for medical administration, $75 million above the FY2008
Administration's request. Furthermore, H.R. 2642, as passed by the Senate, provided $4.1 billion
for medical facilities, and $500 million for medical and prosthetic research. The Senate-passed
bill also did not include any bill language authorizing fee increases as requested by the President.
The Consolidated Appropriations Act, 2008 (H.R. 2764) was signed into law (P.L. 110-161) on
December 26, 2007, and included the MILCON-VA Appropriations Act for FY2008. Under P.L.
110-161, the total amount of funding for the VHA is $37.2 billion.
This report will not be updated.
Most Recent Developments............................................................................................................. 1
Background ..................................................................................................................................... 1
Eligibility for Veterans' Health Care ............................................................................................... 4
"Promise of Free Health Care".................................................................................................. 4
VHA Health-Care Enrollment................................................................................................... 5
Veteran's Status................................................................................................................... 6
Priority Groups and Scheduling Appointments .................................................................. 7
Funding for the VHA....................................................................................................................... 8
Medical Services ....................................................................................................................... 8
Medical Administration............................................................................................................. 8
Medical Facilities ...................................................................................................................... 9
Medical and Prosthetic Research .............................................................................................. 9
Medical Care Collections Fund (MCCF) ................................................................................ 10
FY2007 Budget Summary............................................................................................................. 12
House Action........................................................................................................................... 12
Senate Action .......................................................................................................................... 12
Continuing Appropriations Resolution.................................................................................... 13
FY2007 Supplemental Appropriations.................................................................................... 13
FY2008 VHA Budget .................................................................................................................... 14
FY2008 Congressional Budget Resolution ............................................................................. 14
House Action........................................................................................................................... 14
Construction Projects ........................................................................................................ 15
Senate Action .......................................................................................................................... 15
Construction Projects ........................................................................................................ 16
Consolidated Appropriations Act for FY2008 ........................................................................ 16
Construction Projects ........................................................................................................ 17
Explanatory Statement ............................................................................................................ 17
Joint Efforts Between DOD and VA ................................................................................. 17
Traumatic Brain Injury (TBI) ........................................................................................... 17
Mental Health and Substance Abuse................................................................................. 17
Access to Medical Care in Remote Rural Areas ............................................................... 18
Electronic Medical Record ............................................................................................... 18
Key Budget Issues ......................................................................................................................... 22
Assess an Annual Enrollment Fee........................................................................................... 23
Increase Pharmacy Co-payments ............................................................................................ 23
Impact of Fee Proposals.................................................................................................... 24
Third-Party Offset of First-Party Debt .................................................................................... 24
Future Cost of Veterans' Health Care...................................................................................... 27
Figure 1. VHA Funding, FY2006-FY2008 ..................................................................................... 9
Figure 2. Present Co-payment Process.......................................................................................... 26
Table 1. VA and VHA Appropriations, FY2006-FY2008................................................................ 1
Table 2. Number of Veterans Enrolled in the VA Health-Care System ........................................... 3
Table 3. Number of Patients Receiving Care from the VA.............................................................. 4
Table 4. Medical Care Collections, FY2003-FY2006 ....................................................................11
Table 5. VHA Appropriations by Account, FY2006-FY2008 ....................................................... 19
Table 6. Appropriations for VA Construction Projects, FY2006-FY2008..................................... 21
¡
Appendix A. Priority Groups and Their Eligibility Criteria .......................................................... 28
Appendix B. Veterans' Payments for Health-Care Services, by Priority Group ........................... 30
Appendix C. Financial Income Thresholds for VA Health-Care Benefits..................................... 32
Appendix D. VHA Appropriations for FY2005 and FY2006........................................................ 33
Author Contact Information .......................................................................................................... 35
The Consolidated Appropriations Act, 2008 (H.R. 2764), was passed by the House on December
17, 2007, and the Senate passed a measure the next day, December 18, with an amendment
(McConnell Amendment--adding funding for the Iraq war). The House agreed to the McConnell
Amendment on December 19. The bill was signed into law (P.L. 110-161) on December 26. The
Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2008
(MILCON-VA Appropriations Act), was included as Division I of P.L. 110-161. Under P.L. 110-
161, the total amount of funding for the Veterans Health Administration (VHA) is $37.2 billion;
of this amount, $2.6 billion was designated as contingent emergency funding and was available
for obligation only after the President submitted a budget request to Congress. On January 17,
2008, the President transmitted a request to Congress designating $2.6 billion as an emergency
requirement in accordance with the provisions of P.L. 110-161.1 Table 1 provides funding levels
for VA and VHA as included in the Consolidated Appropriations Act, 2008.2
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The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans
who meet certain eligibility rules, including disability compensation and pensions, education,
training and rehabilitation services, hospital and medical care, assistance to homeless veterans,3
home loan guarantees, and death benefits that cover burial expenses.4 The VA carries out its
programs nationwide through three administrations and the board of veterans appeals (BVA). The
Veterans Health Administration (VHA) is responsible for health-care services and medical
research programs.5 The Veterans Benefits Administration (VBA) is responsible, among other
1
See http://www.whitehouse.gov/omb/budget/amendments/supplemental_1_17_08.pdf, last accessed on January 18,
2008.
2
For detailed information on funding for the Veterans Benefits Administration (VBA) and the National Cemetery
Administration (NCA), see CRS Report RL34038, Military Construction, Veterans Affairs, and Related Agencies:
FY2008 Appropriations, by Daniel H. Else, Christine Scott, and Sidath Viranga Panangala.
3
For detailed information on homeless veterans programs, see CRS Report RL34024, Veterans and Homelessness, by
Libby Perl.
4
For a detailed description on eligibility for veterans disability benefits programs, see CRS Report RL33113, Veterans
Affairs: Basic Eligibility for Disability Benefit Programs, by Douglas Reid Weimer.
5
For a detailed description of veterans' health-care issues, see CRS Report RL33993, Veterans' Health Care Issues, by
(continued...)
things, for providing compensations, pensions, and education assistance.6 The National Cemetery
Administration (NCA)7 is responsible for maintaining national veterans cemeteries; providing
grants to states for establishing, expanding, or improving state veterans cemeteries; and providing
headstones and markers for the graves of eligible persons, among other things.
The VA's budget includes both mandatory and discretionary spending accounts. Mandatory
funding supports disability compensation, pension benefits, vocational rehabilitation, and life
insurance, among other benefits and services. Discretionary funding supports a broad array of
benefits and services, including medical care. In FY2007, discretionary budget authority
accounted for about 48.1% of the total VA budget authority of approximately $80 billion, with
about 90% of this discretionary funding going toward supporting VA health-care programs.
The VHA operates the nation's largest integrated direct health-care delivery system.8 The VA's
health-care system is organized into 21 geographically defined Veterans Integrated Service
Networks (VISNs). Although policies and guidelines are developed at VA headquarters to be
applied throughout the VA health-care system, management authority for basic decision making
and budgetary responsibilities are delegated to the VISNs.9 Congressionally appropriated medical
care funds are allocated to the VISNs based on the Veterans Equitable Resource Allocation
(VERA) system, which generally bases funding on patient workload.10 Prior to the
implementation of the VERA system, resources were allocated to facilities primarily on the basis
of their historical expenditures. Unlike other federally funded health insurance programs, such as
Medicare and Medicaid, which finance medical care provided through the private sector, the
VHA provides care directly to veterans.
In FY2007, the VHA operated 155 medical centers, 135 nursing homes,11 717 ambulatory care
and community-based outpatient clinics (CBOCs),12 and 209 Readjustment Counseling Centers
(Vet Centers).13 The VHA also pays for care provided to veterans by private-sector providers on a
(...continued)
Sidath Viranga Panangala.
6
For a detailed description of veterans' benefits issues, see CRS Report RL33985, Veterans' Benefits: Issues in the
110th Congress, coordinated by Carol D. Davis.
7
Established by the National Cemeteries Act of 1973 (P.L. 93-43).
8
Established on January 3, 1946, as the Department of Medicine and Surgery by P.L. 79-293, succeeded in 1989 by the
Veterans Health Services and Research Administration, renamed the Veterans Health Administration in 1991.
9
Jian Gao, Ying Wang and Joseph Engelhardt, "Logistic Analysis of Veterans' Eligibility-Status Change," Health
Services Management Research, vol. 18, (August 2005), p. 175.
10
About 90% of the VHA appropriation is allocated through VERA. Networks also receive appropriated funds not
allocated through VERA for such things as prosthetics, homeless programs, readjustment counseling, and clinical
training programs. VA facilities could also retain collections from insurance reimbursements and copayments, and use
these funds for the care of veterans.
11
Data on the number of hospitals and nursing homes include facilities damaged by Hurricane Katrina. The data are
current as of December 1, 2006.
12
Data on the number of CBOCs differ from source to source. Some count clinics located at VA hospitals, whereas
others count only freestanding CBOCs. The number represented in this report excludes clinics located in VA hospitals.
The VA plans to activate 38 new CBOCs in FY2007 and FY2008.
13
On February 7, 2007, the Department announced that it will be establishing 23 new Vet Centers in communities
across the nation during 2007 and 2008. New Vet Centers will be located in Montgomery, Alabama; Fayetteville,
Arkansas; Modesto, California; Grand Junction, Colorado; Orlando, Fort Myers, and Gainesville, Florida; Macon,
Georgia; Manhattan, Kansas; Baton Rouge, Louisiana; Cape Cod, Massachusetts; Saginaw and Iron Mountain,
Michigan; Berlin, New Hampshire; Las Cruces, New Mexico; Binghamton, Middletown, Nassau County, and
(continued...)
fee basis under certain circumstances. Inpatient and outpatient care is also provided in the private
sector to eligible dependents of veterans under the Civilian Health and Medical Program of the
Department of Veterans Affairs (CHAMPVA).14 In addition, the VHA provides grants for
construction of state-owned nursing homes and domiciliary facilities, and collaborates with the
Department of Defense (DOD) in sharing health-care resources and services.
During FY2007, the VHA had an estimated total enrolled veteran population of 7.9 million and
provided medical care to about 5.2 million unique veteran patients (see Tables 2 and 3).
According to VHA estimates, the number of unique veteran patients is estimated to increase by
approximately 110,000, from 5.2 million in FY2007 to 5.3 million in FY2008. As shown in Table
3, there would be a 2.4% increase in the total number of unique patients (both veterans and non-
veterans), from 5.7 million in FY2007 to 5.8 million in FY2008.
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2 928,225 531,425 244,525
3 360,699 255,899 140,100,1
4 617,142 023,242 429,242
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6 352,562 619,562 975,662
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7 842,812 397,812 933,912
8 413,771,2 557,281,2 491,881,2
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The total number of outpatient visits, including visits to Vet Centers, reached 60.2 million during
FY2006 and is projected to increase to 64.4 million in FY2007 and 67.4 million in FY2008.15 In
FY2007, the VHA estimates that it will spend approximately 64.8% of its medical services
obligations on outpatient care.16
(...continued)
Watertown, New York; Toledo, Ohio; Du Bois, Pennsylvania; Killeen, Texas; and Everett, Washington. During 2007,
the VA plans to open facilities in Grand Junction, Orlando, Cape Cod, Iron Mountain, Berlin, and Watertown. The
other new Vet Centers are scheduled to open in 2008.
14
For further information on CHAMPVA, see CRS Report RS22483, Health Care for Dependents and Survivors of
Veterans, by Sidath Viranga Panangala and Susan Janeczko.
15
This number excludes outpatient care provided on a contract basis and outpatient visits to readjustment counseling
centers. U.S. Department of Veterans Affairs, FY2008 Congressional Budget Submissions, Medical Programs, vol. 1 of
4, pp. 3-12.
16
Ibid., pp. 3-15.
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3 047,865 733,006 315,816
4 365,771 229,891 535,702
5 187,546,1 707,058,1 212,339,1
6 524,431 466,121 587,131
6-1 spuorG ytiroirP latotbuS 960,736,3 338,938,3 378,469,3
7 109,791 120,933 165,543
8 216,591,1 322,300,1 723,189
8-7 spuorG ytiroirP latotbuS 315,393,1 442,243,1 888,623,1
astneitaP nareteV euqinU latotbuS 285,030,5 770,281,5 167,192,5
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¢
To understand some of the issues discussed later in this report, it is important to understand
eligibility for VA health care, the VA's enrollment process, and its enrollment priority groups.
Unlike Medicare or Medicaid, VA health care is not an entitlement program. Contrary to
numerous claims made concerning "promises" to military personnel and veterans with regard to
"free health care for life," not every veteran is automatically entitled to medical care from the
VA.17 Prior to eligibility reform in 1996, provisions of law governing eligibility for VA care were
complex and not uniform across all levels of care. All veterans were technically "eligible" for
hospital care and nursing home care, but eligibility did not by itself ensure access to care.
The Veterans' Health Care Eligibility Reform Act of 1996, P.L. 104-262, established two
eligibility categories and required the VHA to manage the provision of hospital care and medical
17
For a detailed discussion of "promised benefits," see CRS Report 98-1006, Military Health Care: The Issue of
"Promised" Benefits, by David F. Burrelli.
services through an enrollment system based on a system of priorities.18 P.L. 104-262 authorized
the VA to provide all needed hospital care and medical services to veterans with service-
connected disabilities, former prisoners of war, veterans exposed to toxic substances and
environmental hazards such as Agent Orange, veterans whose attributable income and net worth
are not greater than an established "means test," and veterans of World War I. These veterans are
generally known as "higher priority" or "core" veterans (see Appendix A, discussed in more
detail below).19 The other category of veterans are those with no service-connected disabilities
and with attributable incomes above an established means test (see Appendix C).
P.L. 104-262 also authorized the VA to establish a patient enrollment system to manage access to
VA health care. As stated in the report language accompanying P.L. 104-262, "the Act would
direct the Secretary, in providing for the care of `core' veterans, to establish and operate a system
of annual patient enrollment and require that veterans be enrolled in a manner giving relative
degrees of preference in accordance with specified priorities. At the same time, it would vest
discretion in the Secretary to determine the manner in which such enrollment system would
operate."20
Furthermore, P.L. 104-262 was clear in its intent that the provision of health care to veterans was
dependent upon the available resources. The committee report accompanying P.L. 104-262 states
that the provision of hospital care and medical services would be provided to "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."21
As stated previously, P.L. 104-262 required the establishment of a national enrollment system to
manage the delivery of inpatient and outpatient medical care. The new eligibility standard was
created by Congress to "ensure that medical judgment rather than legal criteria will determine
when care will be provided and the level at which care will be furnished."22
For most veterans, entry into the veterans' health-care system begins by completing the
application for enrollment. Some veterans are exempt from the enrollment requirement if they
meet special eligibility requirements.23 A veteran may apply for enrollment by completing the
Application for Health Benefits (VA Form 10-10EZ) at any time during the year and submitting
18
U.S. Congress, House Committee on Veterans Affairs, Veterans' Health Care Eligibility Reform Act of 1996, report
to accompany H.R. 3118, 104th Cong. 2nd sess., H.Rept. 104-690 p. 2.
19
Ibid., p.5.
20
Ibid., p.6.
21
Ibid., p.5.
22
Ibid., p.4.
23
Veterans do not need to apply for enrollment in the VA's health-care system if they fall into one of the following
categories: veterans with a service-connected disability rated 50% or more (percentage ratings represent the average
impairment in earning capacity resulting from diseases and injuries encountered as a result of or incident to military
service; those with a rating of 50% or more are placed in Priority Group 1); less than one year has passed since the
veteran was discharged from military service for a disability that the military determined was incurred or aggravated in
the line of duty, but the VA has not yet rated; or the veteran is seeking care from the VA only for a service-connected
disability (even if the rating is only 10%).
the form online or in person at any VA medical center or clinic, or mailing or faxing the
completed form to the medical center or clinic of the veteran's choosing.24 Once a veteran is
enrolled in the VA health-care system, the veteran remains in the system and does not have to
reapply for enrollment annually. However, those veterans who have been enrolled in Priority
Group 5 (see Appendix A, discussed in more detail below) based on income must submit a new
VA Form 10-10EZ annually with updated financial information demonstrating inability to defray
the expenses of necessary care.25
Eligibility for VA health care is based primarily on "veteran's status" resulting from military
service. Veteran's status is established by active-duty status in the military, naval, or air service
and an honorable discharge or release from active military service. Generally, persons enlisting in
one of the armed forces after September 7, 1980, and officers commissioned after October 16,
1981, must have completed two years of active duty or the full period of their initial service
obligation to be eligible for VA health-care benefits. Servicemembers discharged at any time
because of service-connected disabilities are not held to this requirement. Also, reservists that
were called to active duty and who completed the term for which they were called, and who were
granted an other than dishonorable discharge, are exempt from the 24 continuous months of
active duty requirement. National Guard members who were called to active duty by federal
executive order are also exempt from this two-year requirement if they (1) completed the term for
which they were called and (2) were granted an other than dishonorable discharge.
When not activated to full-time federal service, members of the reserve components and National
Guard have limited eligibility for VA health-care services. Members of the reserve components
may be granted service-connection for any injury they incurred or aggravated in the line of duty
while attending inactive duty training assemblies, annual training, active duty for training, or
while going directly to or returning directly from such duty. In addition, reserve component
service members may be granted service-connection for a heart attack or stoke if such an event
occurs during these same periods. The granting of service-connection makes them eligible to
receive care from the VA for those conditions. National Guard members are not granted service-
connection for any injury, heart attack, or stroke that occurs while performing duty ordered by a
governor for state emergencies or activities.26
After veteran's status has been established, the VA next places applicants into one of two
categories. The first group is composed of veterans with service-connected disabilities or with
incomes below an established means test. These veterans are regarded by the VA as "high
priority" veterans, and they are enrolled in Priority Groups 1-6 (see Appendix A). Veterans
enrolled in Priority Groups 1-6 include
· veterans in need of care for a service-connected disability;27
24
VA Form 10-10EZ is available at https://www.1010ez.med.va.gov/sec/vha/1010ez/#Process.
25
38 C.F.R. §17.36 (d)(3)(iv) (2005).
26
38.U.S.C. §101(24); 38 C.F.R. §3.6(c).
27
The term "service-connected" means, with respect to disability, that such disability was incurred or aggravated in
line of duty in the active military, naval, or air service. The VA determines whether veterans have service-connected
disabilities and, for those with such disabilities, assigns ratings from 0 to 100% based on the severity of the disability.
Percentages are assigned in increments of 10%.
· veterans who have a compensable service-connected condition;
· veterans whose discharge or release from active military, naval, or air service was
for a compensable disability that was incurred or aggravated in the line of duty;
· veterans who are former prisoners of war (POWs);
· veterans awarded the Purple Heart;
· veterans who have been determined by VA to be catastrophically disabled;
· veterans of World War I;
· veterans who were exposed to hazardous agents (such as Agent Orange in
Vietnam) while on active duty; and
· veterans who have an annual income and net worth below a VA-established
means test threshold.
The VA looks at applicants' income and net worth to determine their specific priority category
and whether they have to pay co-payments for nonservice-connected care. In addition, veterans
are asked to provide the VA with information on any health insurance coverage they have,
including coverage through employment or through a spouse. The VA may bill these payers for
treatment of conditions that are not a result of injuries or illnesses incurred or aggravated during
military service. Appendix B provides information on what categories of veterans pay for which
services.
The second group of veterans is composed of those who do not fall into one of the first six
priority groups--primarily veterans with nonservice-connected medical conditions and with
incomes and net worth above the VA-established means test threshold. These veterans are
enrolled in Priority Group 7 or 8.28 Appendix C provides information on income thresholds for
VA health-care benefits.
¢
The VHA is mandated to provide priority care for non-emergency outpatient medical care for any
condition of a service-connected veteran rated 50% or more, or for a veteran's service-connected
condition.29 According to VHA policies, patients with emergency or urgent medical needs must be
provided care, or must be scheduled to receive care as soon as practicable, independent of
service-connected status and whether care is purchased or provided directly by the VA. Veterans
who are service-connected 50% or more need to be scheduled to be seen within 30 days of the
desired date for any condition.
Veterans who are rated less than 50% service-connected disabled, and who require care for a
service-connected condition, need to be scheduled to be seen within 30 days of the desired date.
When VHA staff are in doubt as to whether the request for care is for a service-connected
28
The VA considers a veteran's previous year's total household income (both earned and unearned income, as well as
his/her spouse's and dependent children's income). Earned income is usually wages received from working. Unearned
income includes interest earned, dividends received, money from retirement funds, Social Security payments, annuities,
and earnings from other assets. The number of persons in the veterans family will be factored into the calculation to
determine the applicable income threshold. 38 C.F.R. § 17.36(b)(7) (2006).
29
VHA Directive 2006-055, October 11, 2006.
condition, they are required to assume, on behalf of the veteran, that the veteran is entitled to
priority access and schedule within 30 days of the desired date.30
Veterans in other priority groups are to be scheduled to be seen within 120 days of the desired
date. According to VHA policies, all outpatient appointment requests must be acted on as soon as
possible, but no later than seven calendar days from the date of the request. The VHA also
requires that priority scheduling of any veteran must not affect the medical care of any other
previously scheduled veteran. Furthermore, VHA guidelines state that veterans with service-
connected conditions cannot be prioritized over other veterans with more acute health-care
needs.31
The VHA is funded through multiple appropriations accounts that are supplemented by other
sources of revenue. Although the appropriations account structure has been subject to change
from year to year, the appropriation accounts used to support the VHA traditionally include
medical care, medical and prosthetic research, and medical administration. In addition, Congress
also appropriates funds for construction of medical facilities through a larger appropriations
account for construction for all VA facilities. In FY2004, "to provide better oversight and [to]
receive a more accurate accounting of funds," Congress changed the VHA's appropriations
structure.32 The Department of Veterans Affairs and Housing and Urban Development and
Independent Agencies Appropriations Act, 2004 (P.L. 108-199, H.Rept. 108-401), funded VHA
through four accounts: (1) medical services, (2) medical administration, (3) medical facilities, and
(4) medical and prosthetic research. Provided below are brief descriptions of these accounts.
The medical services account covers expenses for furnishing inpatient and outpatient care and
treatment of veterans and certain dependents, including care and treatment in non-VA facilities;
outpatient care on a fee basis; medical supplies and equipment; salaries and expenses of
employees hired under Title 38, United States Code; and aid to state veterans homes. In its
FY2008 budget request to Congress, the VA requested the transfer of food service operations
costs from the medical facilities appropriations to the medical services appropriations. The House
and Senate Appropriations Committees have concurred with this request.33
The medical administration account provides funds for the expenses in the administration of
hospitals, nursing homes, and domiciliaries; billing and coding activities; quality of care
oversight; legal services; and procurement.
30
Ibid.
31
Ibid.
32
U.S. Congress, Conference Committees, Consolidated Appropriations Act, 2004, conference report to accompany
H.R. 2673, 108th Cong., 1st sess., H.Rept. 108-401, p. 1036.
33
The cost of food service operations support hospital food service workers, provisions, and supplies related to the
direct care of patients.
The medical facilities account covers, among other things, expenses for the maintenance and
operation of VHA facilities; administrative expenses related to planning, design, project
management, real property acquisition and deposition, construction, and renovation of any VHA
facility; leases of facilities; and laundry services.
This account provides funding for VA researchers to investigate a broad array of veteran-centric
health topics, such as treatment of mental health conditions, rehabilitation of veterans with limb
loss, traumatic brain injury and spinal cord injury, organ transplantation, and the organization of
the health-care delivery system. VA researchers receive funding not only through this account but
also from the DOD, the National Institutes of Health (NIH), and private sources.
As seen in Figure 1, the total level of funding for VHA increased between FY2006 and FY2008,
and most of this increase has been due to the increase in spending on medical services. As a
percentage of total VHA funding, spending on medical facilities, medical administration, and
medical and prosthetic research has been fairly stable.
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In addition to direct appropriations for the above accounts, the Committees on Appropriations
include medical care cost recovery collections when considering the amount of resources needed
to provide funding for the VHA. The Consolidated Omnibus Budget Reconciliation Act of 1985
(P.L. 99-272), enacted into law in 1986, gave the VHA the authority to bill some veterans and
most health-care insurers for nonservice-connected care provided to veterans enrolled in the VA
health-care system, to help defray the cost of delivering medical services to veterans.34
The Balanced Budget Act of 1997 (P.L. 105-33) gave the VHA the authority to retain these funds
in the Medical Care Collections Fund (MCCF). Instead of returning the funds to the Treasury, the
VA can use them for medical services for veterans without fiscal year limitations.35 To increase
the VA's third-party collections, P.L. 105-33 also gave the VA the authority to change its basis of
billing insurers from "reasonable costs" to "reasonable charges."36 This change in billing was
intended to enhance VA collections to the extent that reasonable charges result in higher payments
than reasonable costs.37 In FY2004, the Administration's budget requested consolidating several
medical existing collections accounts into one MCCF. The conferees of the Consolidated
Appropriations Act of 2004 (H.Rept. 108-401) recommended that collections that would
otherwise be deposited in the Health Services Improvement Fund (former name), Veterans
Extended Care Revolving Fund (former name), Special Therapeutic and Rehabilitation Activities
Fund (former name), Medical Facilities Revolving Fund (former name), and the Parking
Revolving Fund (former name) should be deposited in MCCF.38 The Consolidated Appropriations
Act of 2005, (P.L. 108-447, H.Rept. 108-792) provided the VA with permanent authority to
deposit funds from these five accounts into the MCCF. The funds deposited into the MCCF
would be available for medical services for veterans. These collected funds do not have to be
spent in any particular fiscal year and are available until expended.
The conferees of the FY2006 Military Construction, Military Quality of Life and Veterans Affairs
Appropriations Act (P.L. 109-114, H.Rept. 109-305), required the VA to establish a revenue
improvement demonstration project. The purpose of this pilot project is to provide a
"comprehensive restructuring of the complete revenue cycle including cash-flow management
and accounts receivable."39 The conferees included this provision because the Appropriation
Committees were concerned that the VHA was collecting only 41% percent of the billed amounts
from third-party insurance companies. Currently, the VHA has established a pilot Consolidated
Patient Account Center in VISN 6.
34
Veterans' Health-Care and Compensation Rate Amendments of 1985, 100 Stat. 372, 373, 383.
35
For a detailed history of funding for VHA from FY1995 to FY2004, see CRS Report RL32732, Veterans' Medical
Care Funding: FY1995-FY2004, by Sidath Viranga Panangala.
36
Under "reasonable costs," the VA billed insurers based on its average cost to provide a particular episode of care.
Under "reasonable charges," the VA bills insurers based on market pricing for health-care services.
37
U.S. Government Accountability Office (GAO), VA Health Care: Third-Party Charges Based on Sound
Methodology; Implementation Challenges Remain, GAO/HEHS-99-124, June 1999.
38
For a detailed description of these former accounts, see CRS Report RL32548, Veterans' Medical Care
Appropriations and Funding Process, by Sidath Viranga Panangala.
39
U.S. Congress, Conference Committees, Military Construction, Military Quality of Life and Veterans Affairs
Appropriations Act, 2006, conference report to accompany H.R. 2528, 109th Congress, 1st session, H.Rept. 109-305, p.
43.
.ytilicaf lacidem AV eht
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.snoitacidem tneitaptuo rof
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eht AV eht detnarg )7-801 .L.P( 3002 ,noituloseR snoitairporppA detadilosnoC ehT .2002 ,4 yraurbeF no
tceffe otni tnew taht )noitacidem tneitaptuo fo ylppus yad-03 a rof 7$ ot 2$ morf( stnemyap-oc ycamrahp
ni sesaercni tcelloc ot )FISH( dnuF tnemevorpmI secivreS htlaeH eht detaerc ssergnoC ,2002YF nI .a
.sesoprup nosirapmoc rof dedivorp era 3002YF rof stnuocca eseht rof serugif noitcelloC
.sesnepxe gnivil noisnep dna noitasnepmoc dna ,seef gnikrap ,snoitcelloc ypareht krow detasnepmoc ,eunever
gnisael esu decnahne :4002YF litnu FCCM eht otni detadilosnoc ton erew stnuocca gniwollof ehT :setoN
.8-3 .pp ,4 fo 1 .lov ,smargorP lacideM ,snoissimbuS tegduB lanoissergnoC 8002YF ,sriaffA snareteV fo tnemtrapeD
.S.U dna ,sriaffA snareteV fo tnemtrapeD eht yb dedivorp atad no desab SRC yb deraperp elbaT :secruoS
773,700,2$ 980,798,1$ 672,747,1$ 098,135,1$ latoT FCCM
570,2 134,2 436 673 fsesnepxe gnivil noisnep dna noitasnepmoC
380,3 344,3 943,3 692,3 eseef gnikraP
180,04 615,63 884,04 438,83 dsnoitcelloc ypareht krow detasnepmoC
973,3 168,62 954 432 ceunever gnisael esu decnahnE
018,590,1 795,550,1 671,069 141,408 snoitcelloc ecnarusni ytrap-drihT
743,4 114,5 770,5 164,3 bstnemyap-oc erac mret-gnol ytrap-tsriF
575,531 626,811 878,311 499,401 erac tneitaptuo
dna tneitapni rof stnemyap-oc ytrap-tsriF
720,327$ 402,846$ 512,326$ 455,675$ a stnemyap-oc ycamrahp ytrap-tsriF
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total MCCF collections.
million to $863 million. In FY2006, first-party collections represented approximately 43% of
billion in FY2006. During this same period, first-party collections increased by 26%, from $685
As shown in Table 4, MCCF collections increased by 31%, from $1.5 billion in FY2003 to $2.0
¢
On February 6, 2006, the President submitted his FY2007 budget proposal to Congress. The
Administration requested $32.7 billion for the VHA, an 11.3% increase over the FY2006 enacted
amount of $29.3 billion and a 10% increase over FY2005 enacted amount of $29.7 billion (see
Table 5 and Appendix D). The FY2007 request included $25.5 billion for medical services, a
12% increase over the FY2006 enacted amount; $3.2 billion for medical administration, an 11.2%
increase over FY2006; $3.6 billion for medical facilities, an 8.2% increase over FY2006; and
$399 million for medical and prosthetic research, a 3.2% decrease from the FY2006 enacted
amount. (For a detailed breakdown of funding levels for the VHA for FY2005 and FY2006, see
Appendix D).
On May 19, 2006, the House passed its version of the Military Construction, Military Quality of
Life, and Veterans Affairs Appropriations bill (MIL-CON-QUAL-appropriations bill) for FY2007
(H.R. 5385, H.Rept. 109-464). H.R. 5385 provided $32.7 billion for the VHA, a $3.4 billion
(11.4%) increase over the FY2006 enacted amount of $29.3 billion and about the same as the
President's request. This amount included $25.4 billion for medical services, $100 million less
than the President's request and $2.6 billion (11.6%) over the FY2006 enacted amount of $22.8
billion. The MIL-CON-QUAL-appropriations bill for FY2007 also provided $3.3 billion for
medical administration, $100 million above the Administration's request of $3.2 billion, and $3.6
billion for medical facilities, $25 million above the budget request. H.R. 5385 also provided $412
million for medical and prosthetic research, a 3.2% increase over the President's request of $399
million (see Table 5).
On November 14, 2006, the Senate passed by voice vote its version of the Military Construction
and Veterans Affairs, and Related Agencies Appropriations bill (MIL-CON-VA-appropriations
bill) for FY2007 (H.R. 5385, S.Rept. 109-286). H.R. 5385, as amended by the Senate, provided
$32.7 billion for the Veterans Health Administration (VHA) for FY2007, about the same as the
House-passed amount and the President's request. This amount included $28.7 billion for medical
services, a 26.0% increase over the FY2006 enacted amount, a 12.5% increase over the
President's request, and a 13.0% increase over the House-passed amount. The Senate-passed
version of H.R. 5385 also provided $3.6 billion for medical facilities, which was the same as the
Administration's request and $25.0 million less than the House-passed amount, and $412 million
for medical and prosthetic research. This amount was the same as the House-passed amount and
$13.0 million above the President's request (see Table 5).
40
For a detailed description of VA Medical Care Appropriations for FY2007, see CRS Report RL33409, Veterans'
Medical Care: FY2007 Appropriations, by Sidath Viranga Panangala.
At the end of the 109th Congress, Congress did not pass the MIL-CON-VA-appropriations bill for
FY2007, and funded most government agencies, including the VA, through a series of Continuing
Appropriations Resolutions (P.L. 109-289, division B, as amended by P.L. 109-369 and P.L. 109-
383). On January 31, 2007, the House passed the Revised Continuing Appropriations Resolution,
2007 (H.J.Res. 20), and the Senate passed it without amendment on February 14.41 On February
15, 2007, the President signed into law the Revised Continuing Appropriations Resolution, 2007
(H.J.Res. 20, P.L. 110-5). It provided $32.7 billion for the VHA for FY2007, a $14.7 million
increase over the President's request and $3.3 billion above the FY2006 enacted amount. This
amount included $25.5 billion for medical services, $3.2 billion for medical administration, $3.6
billion for medical facilities, and $414 million for medical and prosthetic research. These
amounts were the same as the President's request, except for the medical and prosthetic research
account, which was $15 million above the President's request. The Revised Continuing
Appropriations Resolution did not include any provisions that would have given the VA the
authority to implement fee increases as requested by the Administration's budget proposal for the
VHA for FY2007.
On May 24, 2007, the House and Senate approved the U.S. Troop Readiness, Veterans' Care,
Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (H.R. 2206). The bill was
signed into law on May 25 (P.L. 110-28). Among other things, P.L. 110-28 provided a total of
$1.34 billion for the VHA for FY2007. This amount was in addition to the amount appropriated
under P.L. 110-5. This amount included $400 million for medical services:42 (1) $9.4 million for
polytrauma residential transition rehabilitation programs; (2) $10 million for additional transition
caseworkers; (3) $20 million for substance abuse treatment programs; (4) $20 million for
readjustment counseling (Vet Centers); (5) $10 million for blind rehabilitation services; (6) $100
million for enhancement of mental health services; (7) $8 million for polytrauma support clinic
teams; (8) $5.4 million for additional polytrauma points of contact; (9) $193 million for treatment
of Operation Enduring Freedom/Operation Iraqi Freedom (OEF/OIF) veterans; and (10) $25
million for prosthetics.
P.L. 110-28 also provided $326 million for the Construction, Minor Projects account, with
specific funding of $36.0 million for construction costs related to establishing polytrauma
residential transitional rehabilitation programs.43 It also provided $250 million for medical
administration and $595 million for medical facilities, including specific funding of (1) $45.0
million for facility and equipment upgrades at polytrauma centers and (2) $550 million for non-
recurring maintenance to address structural deficiencies in VA medical facilities.44
41
To calculate the total funding level remaining for the VA in FY2007, the Department would subtract the funding
provided in the previously enacted FY2007 Continuing Resolutions from the amount provided in P.L. 110-5.
42
The initial amount enacted was $466.7 million. P.L. 110-161 (H.R. 2764) transferred $66 million from the FY2007
medical services account to the construction, major projects account for FY2007 to fund a new Level I polytrauma
center to be located in San Antonio, Texas.
43
Conference Report published in Congressional Record, vol. 153, part II (May 24, 2007), pp. H5776-H5910.
44
A list of structural deficiencies identified by the VA can be found at http://www1.va.gov/opa/pressrel/docs/
Environment_of_Care_Roll-up.pdf.
On February 5, 2007, the President submitted his FY2008 budget proposal to Congress. The total
amount requested by the Administration for the VHA for FY2008 was $34.6 billion, a 1.93%
increase in funding compared with the FY2007 enacted amount. The total amount of funding that
would have been available for the VHA under the President's budget proposal for FY2008,
including collections, was approximately $37.0 billion (see Table 5). For FY2008, the
Administration requested $27.2 billion for medical services, a $1.2 billion, or 4.8%, increase in
funding over the FY2007 enacted amount. The Administration's budget proposal also requested
$3.4 billion for medical administration, $3.6 billion for medical facilities, and $411 million for
medical and prosthetic research (see Table 5). As in FY2003, FY2004, FY2005, FY2006, and
FY2007, the Administration included several cost-sharing proposals. These legislative proposals
are discussed in detail in the "Key Budget Issues" section at the end of this report.
On May 17, 2007, the House and Senate adopted the Conference Report (H.Rept. 110-153) to
accompany the Concurrent Resolution on the Budget for FY2008 (S.Con.Res. 21). The
conference agreement provided a total of $85.3 billion in budget authority for all veterans
benefits and services for FY2008, and a total of $452.8 billion in budget authority for FY2008-
FY2012. Of the amount allocated for FY2008, the conference agreement provided $43.1 billion
for discretionary veterans' programs, which consists mainly of VA medical care. Furthermore, the
conference agreement rejected the veterans' health-care enrollment fees and co-payment increases
that were proposed by the President's budget request.
On May 22, 2007, the House Appropriations Committee, Subcommittee on Military Construction,
Veterans Affairs, and Related Agencies, approved by voice vote a draft measure recommending
funding levels for FY2008 for military construction programs, the VA, and related agencies. On
June 6, the full House Appropriations Committee recommended $37.1 billion for the VHA for
FY2008, a 9.3% increase over the FY2007 enacted amount of $34.0 billion and 7.3% above the
President's request. This amount included $28.9 billion for medical services, $1.9 billion (6.9%)
above than the President's request and $2.9 billion (12.0%) over the FY2007 enacted amount of
$26.0 billion. Of the amount recommended for the medical services account, the committee
included bill language stipulating $2.9 billion for speciality mental health care, $130 million for
the homeless veterans grant and per diem program, $429 million for the substance abuse program,
and $100 million for blind rehabilitation services.
The committee recommendation also included $3.6 billion for medical administration, $193
million above the Administration's request of $3.4 billion; $4.1 billion for medical facilities, a
14% increase over the President's request; and $480 million for medical and prosthetic research, a
17% increase over the President's request of $411 million (see Table 5). The committee did not
recommend any fee increases as requested by the Administration's budget proposal for the VHA
for FY2008. The Military Construction and Veterans Affairs appropriations bill for FY2008 (H.R.
2642, H.Rept. 110-186) was reported out of committee on June 11.
On June 15, 2007, the House passed H.R. 2642. As amended, H.R. 2642 provided $29.0 billion
for medical services. This included the transfer of $125 million from the medical administration
account to the medical services account. The reason for this transfer was because during House
floor debate, Representative Shelley Moore Capito offered an amendment to transfer $5 million
to the medical services account for the establishment of an Office of Rural Health within the
Office of the Under Secretary for Health, as directed by P.L. 109-461. Representative Jerry Moran
also offered an amendment to transfer $120 million to the medical services account to increase
funding for the Veterans Beneficiary Travel Program.
The MILCON-VA appropriations bill, as amended, also provided $3.5 billion for the medical
administration account, $68.6 million above the FY2008 request and $82.6 million above the
FY2007 enacted amount. All other amounts for the VHA were equal to the committee-
recommended funding levels.
H.R. 2642 has provided approximately $2.2 billion for VA construction projects (excluding grants
for construction of state veterans cemeteries), including funding for Capital Asset Realignment
for Enhanced Services (CARES) projects (see Table 6).45 A large portion of this amount was for
construction and building improvements of VA medical facilities. The House Appropriations
Committee did not recommended any funding amounts for various construction and projects
submitted by Members of Congress or by the Administration. According to H.Rept. 110-186,
"individual project allocations will be considered comprehensively after the Committee has
properly analyzed all relevant information."46
On June 13, 2007, the Senate Appropriations Committee, Subcommittee on Military
Construction, Veterans Affairs, and Related Agencies, approved a draft version of the MILCON-
VA appropriations bill. On June 14, the full Senate Appropriations Committee approved the
measure. The bill was reported to the Senate on June 18 (S. 1645, S.Rept. 110-85). S. 1645, as
reported, provided a total of $37.2 billion for the VHA. This amount includes $29.0 billion for
medical services, a $3 billion (11.5%) increase over the FY2007 enacted amount and $1.8 billion
over the FY2008 budget request, and $3.6 billion for medical administration, $214 million (6.2%)
above the FY2007 enacted amount and $200 million above the FY2008 Administration's request.
Furthermore, the Senate version of the MILCON-VA appropriations bill, as reported, provided
$4.1 billion for medical facilities--a 14.0% increase over the FY2008 request and 1.7% less than
the FY2007 enacted amount--and $500 million for medical and prosthetic research--a 12%
increase over the FY2007 enacted amount, a 22.0% increase over the FY2008 request, and 4.2%
above the House-passed amount. The committee did not recommend any fee increases as
requested by the Administration's budget proposal for the VHA for FY2008.
45
For a detailed description of the Capital Asset Realignment for Enhanced Services (CARES) program, see CRS
Report RL33993, Veterans' Health Care Issues, by Sidath Viranga Panangala.
46
U.S. Congress, House Committee on Appropriations, Military Construction, Veterans Affairs, and Related Agencies
Appropriations Bill, 2008, report to accompany H.R. 2642, 110th Congress, 1st session, H.Rept. 110-186, p. 51.
On September 6, 2007, the Senate passed H.R. 2642 with an amendment to reflect the Senate
Appropriations Committee-approved measure (S. 1645, S.Rept. 110-85). During Senate floor
debate, an amendment offered by Senator Jon Tester was approved to transfer $125 million from
the medical administration account to the medical services account. This additional amount of
funding would have been available for the Veterans Beneficiary Travel Program. With this
transfer of funds, $29.1 billion would have been available for medical services--a $3.2 billion
(12.3%) increase over the FY2007 enacted amount and $1.9 billion over the FY2008 budget
request--and $3.5 billion would have been available for medical administration, $75 million
above the FY2008 Administration's request (Table 5). All other amounts for the VHA were equal
to the committee-recommended funding levels.
H.R. 2642, as amended by the Senate, provided a total of $1.7 billion for VA construction projects
(Table 6).47 Unlike the House Appropriations Committee, the Senate Appropriations Committee
provided funding for specific construction projects requested by the President. However, the
committee continued the practice of not earmarking major construction projects that are not
requested in the President's budget proposal.
At the end of 2007, Congress passed the Consolidated Appropriations Act for FY2008 (H.R.
2764), an omnibus measure that combined the 11 outstanding appropriations bills for FY2008.48
H.R. 2764 was passed by the House on December 17, 2007; the Senate passed the measure the
next day, December 18, with an amendment (McConnell Amendment--adding funding for the
Iraq war). The House agreed to the McConnell Amendment on December 19. The bill was signed
into law (P.L. 110-161) on December 26. Division I of H.R. 2764 included the Military
Construction and Veterans Affairs and Related Agencies Appropriations Act, 2008 (MILCON-VA
Appropriations Act).
The MILCON-VA Appropriation Act provided $37.2 billion for VHA for FY2008, which is $2.6
billion above the Administration's request for FY2008 (see Table 5). Of this amount, $2.6 billion
(the amount above the Administration's request) was designated as contingent emergency funding
and was to be available for obligation only after the President submitted a budget request to
Congress. On January 17, 2008, the President submitted a budget request to Congress, requesting
this additional amount and designating it as an emergency requirement. Of the total amount
appropriated for VHA, $29.1 billion has been allocated to the medical services account, which is
almost $2 billion above the President's FY2008 request. The amount appropriated for medical
services includes
· an additional $125 million to increase the beneficiary travel reimbursement
mileage rate to 28.5 cents per mile,
· an additional $70 million for substance abuse services,
47
This amounts excludes grants for construction of state veterans cemeteries, which are funded under a separate
account.
48
The only appropriations bill that passed as a stand alone measure was the Department of Defense Appropriations
Act, 2008 (H.Rept. 110-434), which was signed into law on November 13 (P.L. 110-116).
· an additional $12.5 million for expanded outpatient services for the blind, and
· an additional $15 million for Vet Centers.49
The explanatory statement (discussed below) also stipulates that of the total amount appropriated
for medical services, not less than $2.9 billion shall be expended for specialty mental health care,
and not less than $130 million shall be expended for the homeless grants and per diem program.
P.L. 110-161 has appropriated approximately $1.9 billion for VA construction projects, an $818
million increase over the Administration's request. This increase in funding was provided to
address insufficient funding levels in the advanced planning fund and to compensate for cost
adjustments to previously appropriated major construction projects. The Consolidated
Appropriations Act for FY2008 provided funding for specific VA construction projects as
requested by the Administration.
¡¢
The explanatory statement accompanying the Consolidated Appropriations Act (H.R. 2764, P.L.
110-161) included several major areas of interest to the Appropriations Committees, and
incorporated some report language from H.Rept. 110-186, and S.Rept. 110-85.
The Appropriation Committees have urged both DOD and VA to seek every opportunity to
partner to improve the continuity of care for veterans through: joint clinics; joint Centers of
Excellence for Post Traumatic Stress Disorder (PTSD) and Traumatic Brain Injury (TBI); joint
research and/or treatment; and the development of joint clinical practice guidelines for
polytrauma injury, TBI, burns, and amputee care, among other things.
¢
Currently, there is no medical diagnostic code specific to TBI, therefore, it is a challenge to
quantify the number of TBI cases. Presently, both DOD and VA are working with the National
Center for Health Statistics to refine current International Classification of Diseases-9th Revision
(ICD--9) codes to better reflect the TBI patient population within both DOD and VA. Beginning
with FY2009, the appropriators are directing the Administration to include TBI as a select
program within the medical services account in order that committees might better account for
special needs of these patients.
The Appropriation Committees expressed concern about insufficient funding levels for mental
health and substance abuse services in the FY2008 budget request. The Administration's budget
49
Congressional Record, vol. 153 (December 17, 2007), pp. H16386.
request had included a reduction in the number of inpatient beds for psychiatric care and an
anticipated increase of less than one percent for substance abuse services. The Consolidated
Appropriations Act (H.R. 2764, P.L. 110-161) includes increased funding within the medical
services account in order to increase access to substance abuse services, and ensure that adequate
inpatient psychiatric care is maintained. The appropriators also directed the VA to reexamine the
policy for a reduction in psychiatric inpatient care, taking into account the needs of returning OIF
and OEF veterans. Furthermore, the explanatory statement directs the VA not to reduce the
number of inpatient psychiatric beds at any facility that currently has a waiting list.
Veterans access to VA care in remote rural areas has been a long standing issue. To address this
issue the appropriators have directed the VA to provide a report to the committees that includes a
description of the unique challenges and costs faced by veterans in remote rural areas when
obtaining medical services from the VA, and the need to improve access to locally administered
care for veterans who reside in remote rural areas. The report should also identify the need to
fund alternative sources of medical services in areas where VA medical facilities are not
accessible to veterans without them leaving such areas. Moreover, the report should also contain
an assessment of the potential for increasing local access to medical services for veterans in
remote rural areas through strategic partnerships with other government and local private health
care providers.
The explanatory statement accompanying the Consolidated Appropriations Act (H.R. 2764, P.L.
110-161) directs the DOD and VA to provide a joint report to the Committees on Appropriations
detailing the actions being taken by each Department to achieve an interoperable electronic
medical record (EMR) system. Furthermore, the report must identify all ongoing and planned
projects and programs within both DOD and VA addressing interoperability. Similar language has
been included in the Defense Appropriations conference report (H.Rept. 110-434).
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Care: FY2007 Appropriations, by Sidath Viranga Panangala.
Medical Care: FY2006 Appropriations, by Sidath Viranga Panangala; and CRS Report RL33409, Veterans' Medical
Medical Care Appropriations and Funding Process, by Sidath Viranga Panangala; CRS Report RL32975, Veterans'
disabilities. For proposals included in FY2004, FY2005, FY2006, and FY2007, see CRS Report RL32548, Veterans'
In FY2003, the VA proposed a $1,500 deductible for all Priority Group 7 veterans for nonservice-connected 50
proposals, the House and Senate Appropriations Committees have expressed concern on the long-
classified as mandatory receipts to the Treasury. Aside from the Administration's budget
request would not be deposited in the Medical Care Collections Fund (MCCF), but would be
However, unlike previous budget proposals, revenue from the proposals in the FY2008 budget
FY2003, FY2004, FY2005, FY2006, and FY2007 and rejected by Congress each year.50
These proposals are similar to previous ones included in the Administration's budget requests for
In its FY2008 budget request, the Administration has put forward several legislative proposals.
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term cost of providing health care for veterans and the Administration's inability to accurately
estimate the future cost of providing those services.51
The President's FY2008 budget request includes three major policy proposals:
· Assess a tiered annual enrollment fee for all Priority 7 and 8 veterans based on
the family income of the veteran.
· Increase pharmaceutical co-payments from $8 to $15 (for each 30-day
prescription) for all enrolled veterans in Priority Groups 7 and 8.
· Bill veterans receiving treatment for nonservice-connected conditions for the
entire co-payment amount.
A detailed description of these budget proposals follows.
The Administration is proposing a tiered annual enrollment fee, which is structured to charge
$250 for Priority 7 and 8 veterans with family incomes from $50,000 to $74,999; $500 for those
with family incomes from $75,000 to $99,999; and $750 for those with family incomes equal to
or greater than $100,000. The VA has estimated that this proposal would contribute more than
$138 million to the Treasury annually, beginning in FY2009, and will increase revenue by $526
million over five years.
The MILCON-VA Appropriation Act (P.L. 110-161) does not include any bill language that
would give the VA the authority to impose enrollment fees.
¢ ¢
The Administration proposes increasing the pharmacy co-payments from $8 to $15 for all
enrolled Priority Group 7 and Priority Group 8 veterans whenever they obtain medication from
the VA on an outpatient basis for the treatment of a nonservice-connected condition. The
Administration put forward this proposal in its FY2004, FY2005, FY2006, and FY2007 budget
requests as well, but did not receive any approval from Congress. At present, veterans in Priority
Groups 2-8 pay $8 for a 30-day supply of medication, including over-the-counter medications.52
The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) authorized the VA to charge most
veterans $2 for each 30-day supply of medication furnished on an outpatient basis for treatment
of a nonservice-connected condition. The Veterans Millennium Health Care and Benefits Act of
1999 (P.L. 106-117) authorized the VA to increase the medication co-payment amount and
establish annual caps on the total amount paid, to eliminate financial hardship for veterans
51
U.S. Congress, House Committee on Appropriations, Military Construction, Veterans Affairs, and Related Agencies
Appropriations Bill, 2008, report to accompany H.R. 2642, 110th Congress, 1st session, H.Rept. 110-186, p.14.
52
The following veterans are exempt from paying copayments: veterans receiving a pension for a nonservice-
connected disability from the VA; veterans with incomes below $10,929 (if no dependents) and $14,313 (with one
dependent plus $1,866 for each additional dependent); veterans receiving care for conditions such as Agent Orange or
Military Sexual Trauma, and combat veterans within two years of discharge; and veterans who are former POWs.
enrolled in Priority Groups 2-6.53 When veterans reach the annual cap, they continue to receive
medications without making a co-payment.
On November 15, 2005, the VHA issued a directive stating that effective January 1, 2006, the
medication co-payment will be increased to $8 for each 30-day supply of medication furnished on
an outpatient basis for treatment of a nonservice-connected condition, and that the annual cap for
veterans enrolled in Priority Groups 2-6 will be $960.54 There is no cap for veterans in Priority
Groups 7 and 8 (see Appendixes B and C). The VA estimates that if the current proposal to raise
the co-payment were enacted, it would contribute $311 million to the Treasury in FY2008 and
will increase revenue by $1.6 billion over five years. The MILCON-VA Appropriation Act (P.L.
110-161) does not include any bill language that would give the VA the authority to increase co-
payments.
According to VA estimates, of the 5.8 million unique patients that it expects to see in 2008,
111,000 may choose not to use the system if an enrollment fee is imposed and the pharmacy
copays are increased.
¢ ¢
The Administration is requesting that Congress amend the VA's statutory authority by eliminating
the practice of reducing first-party co-payment debts with third-party health-insurance
collections. The VA asserts that this proposal would align the VA with the DOD health-care
system for military retirees and with the private sector.
With the enactment of P.L. 99-272 in 1986, Congress authorized the VA to collect payments from
third-party health insurers for the treatment of veterans with nonservice-connected disabilities; it
also established co-payments from veterans for this care.55 Under current law, the VA is
authorized to collect from third-party health insurers to offset the cost of medical care furnished
to a veteran for the treatment of a nonservice-connected condition.56 If the VA treats an insured
veteran for a nonservice-connected disability, and the veteran is also determined by the VA to
have co-payment responsibilities, the VA will apply the payment collected from the insurer to
satisfy the veteran's co-payment debt related to that treatment.
Under the current co-payment billing process, in cases where the cost of a veteran's medical care
for a nonservice-connected condition appears to qualify for billing under reimbursable insurance
and co-payment, the VA medical facilities sends the bill to the insurance provider. The veteran's
co-payment obligation is placed on hold for 90 days pending payment from the third-party payer.
53
This law allowed the VA to increase the copayment amount for each 30-day or less supply of medication provided on
an outpatient basis (other than medication administered during treatment) for treatment of a nonservice-connected
condition. Accordingly, the VA increased the co-payment amount from $2 to $7. The medication co-payment charge
for each subsequent calendar year after 2002 is established by using the prescription drug component of the Medical
Consumer Price Index. When an increase occurs, the co-payment increases in whole dollar amounts. The amount of the
annual cap increases $120 for each $1 increase in the co-payment amount.
54
VHA Directive 2005-052, Implementation of Medication Copayment Changes, November 15, 2005.
55
Consolidated Omnibus Budget Reconciliation Act of 1985, 100 Stat. 372, 373, 383.
56
38 U.S.C. §1729; 38 U.S.C. §1710; and 38 U.S.C. 1722A.
If no payment is received from the third-party payer within 90 days, a bill is sent to the veteran
for the full co-payment amount. However, when insurers reimburse the VA after the 90-day
period, the VA must absorb the cost of additional staff time for processing a refund if the veteran
has already paid the bill. On all insurance policies, the entire amount of the claim payment is
applied first to the co-payment. The veteran is then billed only for the portion of the co-payment
not covered by the insurance reimbursement and the portion of the co-payment for services not
covered by the veteran's insurance plan (see Figure 2).
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Under the Administration's proposal, veterans receiving medical care services for treatment of
non-service-connected disabilities will receive a bill for their entire co-payment, and the co-
payment will not be reduced by collection recoveries from third-party health plans. This proposal
would apply to all veterans who make co-payments.
According to VA estimates, this proposal will increase revenue by $44 million in FY2008 and
$217 million over five years. The House and Senate Appropriations Committees have not
addressed this issue because it is an issue in the purview of the authorizing committees.
On February 15, 2007, the Congressional Budget Office (CBO) testified that "assuming no major
changes in policy and no major changes in enrollment trends ... that [VHA] medical spending
would increase from $35 billion in 2007 to $66 billion in 2025, or 88 percent cumulative real
growth. That increase implies annual real growth that averages 3.6 percent over the period."57 The
House and Senate Appropriations Committees have expressed concern that the President's budget
has not accurately projected the future cost of health care for veterans from FY2008-FY2012.
Furthermore, the House Appropriations Committee expressed doubt in the actuarial model
currently used to project health-care demand for Operation Enduring Freedom (OEF) and
Operation Iraqi Freedom (OIF) veterans. The House Appropriations Committee has included a
general provision in H.R. 2642 directing the CBO to submit a report projecting the annual
funding level necessary for the VHA to continue providing health care for veterans from FY2009
through FY2012.
57
Statement of Allison Percy, Principal Analyst, on the Future Medical Spending by the Department of Veterans
Affairs, before the House Committee on Appropriations, Subcommittee on Military Construction, Veterans Affairs, and
Related Agencies, February 15, 2007.
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fi ylno tub ,seY ecivres %05 naht ssel htiw
snaretev rof ylno tub ,seY
noitidnoc
detcennoc
oN -ecivresnon oN oN oN oN 1 puorG ytiroirP
rof saw erac
fi ylno tub ,seY
gnilliB gnilliB a noitacideM tneitap tseT tnemyapoC
ycnegremE ecnarusnI -tuO snaeM tseT snaeM
nairatinamuH AV cihpargoeG
tneitapnI
stnemyapoC
¢ ¢
¡ ¢
.ylppa nac stnemyap-oc dna reirrac
ecnarusni eht ot dellib eb lliw ,detcennoc-ecivresnon si ti fi ,erusopxe ot detaler ton si taht dedivorp erac
,revewoH .stnemyap-oc ot tcejbus ton era dna reirrac ecnarusni htlaeh eht ot dellib ton era noitanimaxe
eht fo stluser eviecer ot stisiv pu-wollof dna noitanimaxe yrtsiger laitini ehT .ecneirepxe ro erusopxe
rieht ot detaler ton si noitacidem ro tnemtaert rieht nehw stnemyap-oc ot tcejbus era yratilim eht ni elihw
tnemtaert muidar laegnyrahposan deviecer ohw recnac kcen dna daeh htiw snaretev dna ;amuart lauxes
yratilim gnimialc snaretev ;DAHS/211 tcejorP ni detapicitrap ohw snaretev ;yratilim eht morf egrahcsid
fo sraey owt nihtiw snaretev tabmoc ;noitaidaR gnizinoI ot desopxe snaretev ;stnanimatnoc latnemnorivne
ot erusopxe gnimialc snaretev ;egnarO tnegA ot erusopxe gnimialc snaretev--6 puorG ytiroirP .d
.naretev
7 puorG ytiroirP a sa stnemeriuqer tnemyap-oc eht ot tcejbus llits era tnemtaert rof 4 puorG ytiroirP
ni decalp era ohw dna delbasid yllacihportsatac eb ot denimreted era ohw snaretev 7 puorG ytiroirP .c
.9991 ,03 .voN no )711-601 .L.P( tcA stifeneB dna eraC htlaeH muinnelliM snareteV eht
fo tnemtcane eht htiw derrucco egnahc sihT .3 puorG ytiroirP ni era traeH elpruP a fo tpiecer ni snareteV .b
.8 ro 7 spuorG ytiroirP ni dellorne snaretev rof dehsilbatse neeb
ton sah pac tnemyap-oc launna nA .tem si pac tnemyap-oc retfa desnepsid eb ot eunitnoc lliw noitacideM
.6-2 spuorG ytiroirP ni dellorne snaretev rof dehsilbatse neeb sah pac tnemyap-oc noitacidem launna nA .a
.snoitidnoc detcennoc
-ecivresnon rieht fo erac rof stnemyap-oc noitacidem dna tneitaptuo rof elbisnopser osla era puorg ytiroirp
siht ni snareteV .snoitidnoc detcennoc-ecivresnon rieht fo erac rof tnemyap-oc meid rep tneitapni eht dna
tnemyap-oc tneitapni lluf eht rof elbisnopser era puorg ytiroirp siht ni dellorne snareteV .dlohserht tseT snaeM
cihpargoeG eht evoba dna dlohserht tseT snaeM AV eht evoba emocni evah snaretev c8 dna a8 puorG ytiroirP
.naretev
eht fo emocni eht no desab 6 dna 4 spuorG ytiroirP ni snaretev ot ylppa nac stnemyap-oc tneitapni decuder
taht etoN .segrahc tnemyap-oc elbacilppa lluf eht dessessa eb lliw snaretev dna ,tnemyap-oc noitacidem dna
tneitaptuo ot ylppa ton seod noitcuder tnemyap-oc tset snaem cihpargoeg ehT .tnemyap-oc meid rep tneitapni
eht fo %02 dna tnemyap-oc tneitapni eht fo %02 rof elbisnopser era dna dlohserht tseT snaeM cihpargoeG
eht woleb tub dlohserht tseT snaeM AV eht evoba emocni evah snaretev c7 dna a7 puorG ytiroirP :setoN
.sriaffA snareteV fo tnemtrapeD eht morf noitamrofni no desab SRC yb deraperp elbaT :ecruoS
noitidnoc
detcennoc noitidnoc
oN -ecivresnon detcennoc-ecivresnon seY seY oN c8 puorG ytiroirP
rof saw erac rof saw erac fi ylno tub ,seY
fi ylno tub ,seY
noitidnoc
detcennoc noitidnoc
oN -ecivresnon detcennoc-ecivresnon seY seY oN a8 puorG ytiroirP
rof saw erac rof saw erac fi ylno tub ,seY
fi ylno tub ,seY
gnilliB gnilliB a noitacideM tneitap tseT tnemyapoC
ycnegremE ecnarusnI -tuO snaeM tseT snaeM
nairatinamuH AV cihpargoeG
tneitapnI
stnemyapoC
.sriaffA snareteV fo tnemtrapeD :ecruoS
668,1$ 668,1$ :dda ,tnedneped
lanoitidda hcae roF
ssel ro 849,83$ ssel ro 119,91$ stnedneped 4
ssel ro 280,73$ ssel ro 540,81$ stnedneped 3
ssel ro 612,53$ ssel ro 971,61$ stnedneped 2
ssel ro 053,33$ ssel ro 313,41$ tnedneped 1
ssel ro 097,72$ ssel ro 929,01$ stnedneped oN
--fo semocni htiw snaretev rof erac --fo semocni htiw snaretev rof stifeneb --htiw snareteV
tneitaptuo dna tneitapni AV eerF levart dna snoitpircserp AV eerF
¡
715,043,92 349,233,13 486,028,82 949,504,03 578,886,92 391,458,82 073,803,82 205,591,82 )snoitcelloc tuohtiw(
snoitairporppa AHV latoT
i
-- -- -- -- -- -- -- 006,847,62 erac lacideM
-- 128,654,1 -- -- -- -- -- -- ygolonhcet noitamrofnI
000,214 000,214 000,393 000,393 843,204 395,504 077,483 077,483 hcraeser citehtsorp dna lacideM
966,792,3 966,792,3 966,792,3 966,792,3 949,167,3 000,547,3 000,547,3 909,64 seitilicaf lacidem latotbuS
-- -- -- -- 909,64 -- -- 909,64 )423-801
.L.P( snoitairporppa latnemelppuS
966,792,3 966,792,3 966,792,3 966,792,3 040,517,3 000,547,3 000,547,3 -- seitilicaf lacideM
244,858,2 244,858,2 478,431,4 478,715,4 003,966,4 000,507,4 000,507,4 049,1 noitartsinimda
lacidem latotbuS
-- -- -- -- 049,1 -- -- 049,1 )423-801
.L.P( snoitairporppa latnemelppuS
244,858,2 244,858,2 478,431,4 478,715,4 063,766,4 000,507,4 000,507,4 -- noitartsinimda lacideM
604,277,22 110,803,32 141,599,02 604,791,22 872,558,02 006,899,02 006,374,02 382,310,1 secivres lacidem latotbuS
000,72 -- -- 000,72 -- -- -- -- )841-901 .L.P( cimednaP ulF
naivA-snoitairporppa ycnegremE
562,891 -- -- 562,891 -- -- -- -- )841-901 .L.P( senacirruH tsaoC
fluG-snoitairporppa ycnegremE
h000,522,1 g000,779,1 -- f000,779,1 -- -- -- -- snoitairporppa ycnegremE
-- -- -- -- e000,005,1 d000,005,1 c000,579 b000,579 snoitairporppa latnemelppuS
-- -- -- -- 382,83 -- -- 382,83$ )423-801
.L.P( snoitairporppa latnemelppuS
141,223,12$ 110,133,12$ 141,599,02$ 141,599,91$ 599,613,91$ a 006,894,91$ 006,894,91$ -- secivres lacideM
detcane etaneS esuoH tseuqer detcane etaneS esuoH tseuqer margorP
6002YF 6002YF 6002YF 6002YF 5002YF 5002YF 5002YF 5002YF
)sdnasuoht ni $ (
¡
.7002YF ni noillib 33.2$ dna ,6002YF ni noillib 71.2$ ,5002YF ni noillib
589.1$ eb ot detamitse ,detcelloc eunever eht ot lauqe ytirohtua tegdub etinifedni na sa AHV eht ot derotser era stpiecer )FCCM( dnuF noitcelloC tsoC eraC lacideM .j
.seitilicaf lacidem dna ,noitartsinimda lacidem ,secivres lacidem rof gnidnuf sedulcni tnuoma sihT .i
.noitairporppa ycnegreme
na sa tnuoma siht detangised dna 8252 .R.H ynapmocca ot )503-901 .tpeR.H( troper ecnerefnoc eht detpoda etaneS dna esuoH eht ,5002 ,81 rebmevoN nO .h
.noitairporppa ycnegreme
na sa tnuoma siht detangised dna )501-901 .tpeR.S( eettimmoc fo tuo ylbarovaf 8252 .R.H detroper snoitairporppA no eettimmoC etaneS eht ,5002 ,12 yluJ nO .g
.6002YF rof secivres lacidem rof noillib 779.1$ lanoitidda na detseuqer noitartsinimdA eht ,5002 ,41 yluJ nO .f
.wal otni dengis saw )45-901 .L.P ,1632 .R.H( llib snoitairporppa seicnegA detaleR dna ,tnemnorivnE ,roiretnI eht fo tnemtrapeD 6002YF eht ,5002 ,2 tsuguA nO .e
.secivres lacidem rof sdnuf ycnegreme ni noillib 5.1$
dda ot 6002 ,llib snoitairporppA seicnegA detaleR dna ,tnemnorivnE ,roiretnI eht fo tnemtrapeD eht ,1632 .R.H ot tnemdnema na dessap etaneS eht ,5002 ,92 enuJ nO .d
.0313 .R.H dessap esuoH eht ,5002 ,03 enuJ nO .c
.5002YF rof secivres lacidem rof noillim 579$ lanoitidda na detseuqer noitartsinimdA eht ,5002 ,03 enuJ nO .b
.tnemeriuqer ycnegreme na sa detangised noillib 2.1$ sedulcni tnuoma sihT .a
.841-901 .L.P fo )2()c(1083 noitceS ,III eltiT ,B noisiviD ni detalupits sa snoitcuder draob-eht-ssorc yna ot tcejbus
ton era 6002YF rof stnuoma noitairporppA .snoitcuder draob-eht-ssorca %8.0 eht ot tcejbus ton era 5002YF rof snoitairporppa latnemelppuS .744-801 .L.P fo )1()a( 221
noitceS ,J noisiviD ni rof dellac sa stnuocca yranoitercsid tsom ni noitcuder draob-eht-ssorca %8.0 eht rof tnuocca ot detsujda 5002YF rof stnuoma noitairporppA :setoN
.atad eettimmoC snoitairporppA esuoH dna ;953-901
.tpeR.H ;503-901 .tpeR.H ;501-901 .tpeR.S ;59-901 .tpeR.H ;353-801 .tpeR.S ;476-801 .tpeR.H no desab ecivreS hcraeseR lanoissergnoC eht yb deraperp elbaT :ecruoS
715,015,13$ 349,205,33$ 486,099,03$ 949,575,23$ 958,476,13$ 391,658,03$ 073,013,13$ 205,791,03$ )snoitcelloc dna
snoitairporppa( AHV :latoT
000,071,2 000,071,2 000,071,2 000,071,2 489,589,1 000,200,2 000,200,2 000,200,2 j
)FCCM(
noitcelloc tsoc erac lacideM
detcane etaneS esuoH tseuqer detcane etaneS esuoH tseuqer margorP
6002YF 6002YF 6002YF 6002YF 5002YF 5002YF 5002YF 5002YF
Sidath Viranga Panangala
Analyst in Veterans Policy
spanangala@crs.loc.gov, 7-0623
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For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34063