[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

U.S. DEPARTMENT OF VETERANS AFFAIRS BUDGET REQUEST FOR FISCAL YEAR 2017

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HEARING

before the

COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

SECOND SESSION

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WEDNESDAY, FEBRUARY 10, 2016

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Serial No. 114-53

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Printed for the use of the Committee on Veterans' Affairs

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COMMITTEE ON VETERANS' AFFAIRS

JEFF MILLER, Florida, Chairman

DOUG LAMBORN, Colorado CORRINE BROWN, Florida, Ranking
GUS M. BILIRAKIS, Florida, Vice- Member
Chairman MARK TAKANO, California
DAVID P. ROE, Tennessee JULIA BROWNLEY, California
DAN BENISHEK, Michigan DINA TITUS, Nevada
TIM HUELSKAMP, Kansas RAUL RUIZ, California
MIKE COFFMAN, Colorado ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American
Samoa
MIKE BOST, Illinois
Jon Towers, Staff Director
Don Phillips, Democratic Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
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C O N T E N T S

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Wednesday, February 10, 2016

Page

U.S. Department of Veterans Affairs Budget Request For Fiscal
Year 2017...................................................... 1

OPENING STATEMENTS

Honorable Jeff Miller, Chairman.................................. 1
Honorable Corrine Brown, Ranking Member.......................... 3
Prepared Statement........................................... 40

WITNESSES

Honorable Robert A. McDonald, Secretary, U.S. Department of
Veterans Affairs............................................... 4
Prepared Statement........................................... 40

Accompanied by:

Honorable David J. Shulkin, Under Secretary for Health, U.S.
Department of Veterans Affairs

Danny Pummill, Acting Under Secretary for Benefits, Veterans
Benefits Administration, U.S. Department of Veterans
Affairs

Ronald Walters, Interim Under Secretary for Memorial Affairs,
U.S. Department of Veterans Affairs

Honorable LaVerne Council, Assistant Secretary for
Information and Technology and Chief Information Officer,
Office of Information and Technology, U.S. Department of
Veterans Affairs

Ed Murray, Interim Secretary for Management and Interim Chief
Financial Officer, U.S. Department of Veterans Affairs

STATEMENTS FOR THE RECORD

Government Accountability Office................................. 73
Co-Authors of the Indepedent Budget.............................. 83
The American Legion.............................................. 98

U.S. DEPARTMENT OF VETERANS AFFAIRS BUDGET REQUEST FOR FISCAL YEAR 2017

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Wednesday, February 10, 2016

Committee on Veterans' Affairs,
U. S. House of Representatives,
Washington, D.C.
The Committee met, pursuant to notice, at 10:00 a.m., in
Room 334, Cannon House Office Building, Hon. Jeff Miller
[Chairman of the Committee] presiding.
Present: Representatives Miller, Lamborn, Bilirakis, Roe,
Benishek, Huelskamp, Coffman, Wenstrup, Walorski, Abraham,
Zeldin, Costello, Radewagen, Brown, Takano, Titus, Ruiz,
Kuster, O'Rourke, Rice, McNerney, and Walz.

OPENING STATEMENT OF JEFF MILLER, CHAIRMAN

The Chairman. Good morning. This hearing will come to
order.
Mr. Secretary--
Secretary McDonald. Good morning.
The Chairman [continued].--thank you for being here with us
today. We are gathered to receive the President's VAs budget
recommendation for fiscal year 2017, as well as the advanced
appropriation recommendation for fiscal year 2018. As everybody
knows, the budget request came out only yesterday, so
admittedly, there is a lot for everybody in this room to
digest.
Mr. Secretary, I am told you have come with charts today to
help us in that effort. And we thank you in advance, for the
visuals that you provided for us to be able to understand you a
little more clearly.
Let me briefly outline some areas that I would like for you
to cover for us in more detail this morning. First, I think
there is general agreement among Members of Congress that you
Mr. Secretary, and veteran organizations, that greater reliance
on outside care providers is absolutely essential to providing
high-quality care for our veterans.
The Choice Program got off to an uneven start, if you will,
for a plethora of reasons, but the basic concept behind its
inception still holds true today, namely veterans shouldn't be
forced to travel or wait for a VA appointment if a community
option is available to them. And if that option exists, it
should be the veteran's choice, not the VA's choice as to
whether or not they can exercise that option.
The $10 billion Choice Program fund will more than likely
be depleted within the next fiscal year. We have asked for and
received a plan from VA to consolidate all of VA's outside care
authorities into a new Veterans Choice Program going forward.
We are aggressively working the legislation to make the
program a reality, and I know that is something that is very
important to you, Mr. Secretary.
I am also interested to know what the cost assumptions are
in the budget for the new Choice Program for the next two
fiscal years, and how it can be paid for, given the current
fiscal constraints that exist here in Washington.
I am also interested to see what impact greater reliance on
outside providers is actually having on wait times. Simply
adding more capacity within VA and opening up additional
outside care options doesn't seem to have moved needle yet
much, because as the Secretary has told us, demand from
existing and new users of the system has overwhelmed whatever
new capacity is being created.
This is an issue that the Commission on Care is evaluating,
and we will get the Commission's recommendations later this
summer, but we need to make sure that what changes we are
putting forward not only work, but are fiscally sustainable,
and that they also lay out the groundwork for what the VA
health delivery system will look like 20 years from now.
Second, I think it goes without saying, I have been pretty
critical of VA touting its claims of backlog reduction success
because it really, I think, has ignored the experience of
veterans whose waits have grown longer in other areas of the
claims process.
The growing appeals backlog is a glaring example, and I am
glad the Secretary has put forward an idea for a large-scale
structural reform, instead of simply throwing more money
staffing over the next decade. I put forward a similar reform
proposal in concept, so I am interested in hearing more from
the Secretary this morning about his ideas.
Thirdly, the conversation we are having on the budget
wouldn't be complete if we didn't discuss VA's stewardship of
taxpayer dollars over the last year. As my Ranking Member
knows, we cannot have a hearing in this room without discussing
Denver.
It was a botched construction project. We know that it is
going to be close to a billion dollars over budget. The
department has spent millions of dollars on art projects,
relocation benefits, bonuses for failing employees.
And last July, the agency threatened to shut down hospitals
within weeks, due to a budget shortfall that actually was kept
internal in the preceding months, forcing Congress to give the
department access to an additional $3 billion, all of which
came out of Choice.
In classic fashion, I am not aware of a single employee
that has been held accountable for any of these unprecedented
failures. And I will continue to fight to ensure that VA has
the resources that it needs. But given some of the problems,
this budget request is going to continue to receive every bit
of scrutiny that I think the American taxpayers would expect us
to give it. It is the very least we can do for our veterans and
the taxpayers and our country.
And, finally, I would be remiss if I didn't mention my
frustration, and I am sure many of the frustrations shared by
my colleagues on this panel, of the recent string of Merit
Service Protection Board decisions overturning disciplinary
actions proposed by VA Deputy Secretary Sloan Gibson. We have
got to have an honest conversation about what is happening
within the Civil Service system.
As the deputy noted in his statement last Friday after the
most recent MSPB decision, and I quote, ``It appears that the
MSPB does not agree with the Congress or the VA's
interpretation of the extent of my authority, and has once
again substituted its judgment for mine and demonstrated a
willingness to second guess the VA's application of legitimate
high standards for accountability,'' end quote.
I will let the deputy's strong statement speak for itself,
but needless to say, there is a massive problem here that
permeates the entire conversation about the resources that VA
has. Absent accountability, we are doomed to see repeated
problems persist no matter the budget that we provide to the
VA, no matter how much the Secretary tries to make the changes
at the VA.
VA's mission of serving veterans is second to none in our
government. Creating a higher standard for performance because
of that mission, is what the public expects of each of us. And
I remained committed to working with you, Mr. Secretary, on how
we can strengthen the system of accountability within the
department, and across the Federal Government system. It is
imperative to everything, you and we, will attempt to
accomplish for veterans.
Mr. Secretary, before I turn it over to the Ranking Member,
I would like to take a moment to compliment you and your staff
for the work that you all did in producing the final master
plan for the West Los Angeles Campus. I visited the campus a
few weeks ago and saw the enormous potential for the
restoration of the property, and the mission of any future
tenant of the property, to its original purpose of serving the
veterans.
You brought a lot of competing interests together who, not
long ago, were extremely far apart. Considering the potential,
the West LA Campus has, in helping homeless veterans in the Los
Angeles area, to reintegrate into society. I salute you and the
leadership that you have shown.
And with that, I recognize the Ranking Member, Ms. Brown,
for her opening remarks.

OPENING STATEMENT OF CORRINE BROWN, RANKING MEMBER

Ms. Brown. Thank you, Mr. Chairman.
Mr. Secretary, I want to thank you and thank the President.
During this President's tenure, discretionary spending has
increased 86%. I think that deserves repeating. During
President Barack Obama's tenure, discretionary spending has
increased 86%. What this says is this President just doesn't
talk the talk. He walks the walk and as one veteran group says,
he rolls the roll.
The President is doing his part to take care of veterans. I
believe that this budget provides us with a starting point to
begin the process of making sure that veterans are getting the
benefits and service we have promised them.
I look forward to discussing your proposal to establish an
additional appropriation account focused on community care,
especially in light of your repeated requests for budget
flexibility.
I want to be assured that this account will not take our
focus away from providing the VA with the resources it needs to
provide health care to our veterans.
In light of the shortfalls, VA faced last year, and the
uncertainty of reform efforts, I want to ask you, Mr.
Secretary, the question I ask every year, does this budget give
you what you need to accomplish your mission?
Do you believe that there are areas that need a special
focus and may need additional dollars?
I stand ready to do whatever I can to make sure you have
what you need. But while I will be in the front line of
fighting for the dollars you need, I want to make it very
clear, I expect you to spend every dollar we give you wisely
for our veterans.
I believe we must focus on our veterans. By focusing on our
veterans, we will begin the process of rethinking how we ensure
that we keep our promises to them in the years ahead.
So let us know what you need, and we will, working
together, on both sides of the aisle, make sure you have the
tools and the dollars to accomplish your mission.
And as I close,failure is not an option. It is not. We are
going to take care of our veterans. And with that, I yield back
the balance of my time.

[The prepared statement of Corrine Brown appears in the
Appendix]

The Chairman. Thank you very much, Ms. Brown.
I would like to welcome our first panel to the table this
morning. Accompanying the Honorable Robert McDonald, Secretary
of Veterans Affairs, this morning is the Honorable Dr. David
Shulkin, Under Secretary for Health; Mr. Danny Pummill, Acting
Under Secretary for Benefits; Mr. Ronald Walters, Interim Under
Secretary for Memorial Affairs; the Honorable LaVerne Council,
Assistant Secretary for Information Technology and Chief
Information Officer; and Mr. Ed Murray, Interim Secretary for
Management and Interim Chief Financial Officer.
I appreciate all of you being here today. I appreciate also
your willingness to engage the Committee Members when we have
questions and issues that come up outside of this room. Your
openness with us is greatly appreciated.
Mr. Secretary, you can proceed with your opening statement.
Members, the Secretary has requested and we have granted 15
minutes this morning for the Secretary's opening statement.

STATEMENT OF THE HONORABLE ROBERT A. MCDONALD

Secretary McDonald. Thank you, Mr. Chairman.
Chairman Miller, Ranking Member Brown, distinguished
Members of the Committee, thank you for this opportunity to
present the President's 2017 budget and 2018 advanced
appropriation request for the Department of Veterans Affairs.
Mr. Chairman, ten of our top 16 executives are new since I
became secretary, all with substantial business experience.
Their fresh perspectives combined with our more experienced
government and health care executives are catalyzing
innovation, meaningful change, and opportunity.
Our leadership team today is comfortable with and actually
invites honest, sometimes tough discussions about transforming
VA. With me here on the panel, everyone is new to position
since I was sworn in as secretary with the exception of Mr.
Walters.
I have a written statement that I ask to be submitted for
the record.
The Chairman. Without objection.
Secretary McDonald. Thank you, sir.
The President has proposed $182.3 billion for the
department in fiscal year 2017. We think it is a strong budget,
another tangible sign of the President's devotion to veterans
and their families.
The President's proposal provides the funding needed to
enhance services to veterans in the short term, to transform
VA's systems to better serve veterans over the long term, and
to support and sustain progress that we have made toward any
disability claims backlog and veterans homelessness.
It supports VA's four agency priority goals, to improve the
veterans' experience with VA, to improve VA's employee
experience, to improve access to health care as experienced by
the veteran, and to improve the dependency claims process.
It also sustains our commitment to end veterans'
homelessness, improves programs for veterans' care in the
community, streamlines and reforms the appeals process,
advances medical and prosthetic research, strengthens veterans'
benefits programs, and proposes increased budget flexibility.
It supports our five MyVA transformational objectives to
modernize VA's culture, processes and capabilities, and to put
the needs and the interests of veterans and their families at
the center of everything we do.
Improving the veteran experience is our first and primary
strategic objective of the MyVA transformation. It is important
that every contact between veterans and the VA will be
predictable, consistent, easy, and outstanding.
Second, making things better for veterans by improving the
employee experience. We have no hope of improving the veteran
experience without also training and improving the employee
experience.
Third, we want to improve internal support services and
bring our IT infrastructure into the 21st century to enable
employees and leaders to better serve veterans.
Fourth, we want to establish a department-wide culture of
continuous improvement that would be undergirded by Lean Six
Sigma.
And, fifth, we want to expand strategic partnerships,
extending the reach of services available to veterans and their
families. And then we will also continue to support our 12 MyVA
breakthrough priorities that improve the delivery of timely
care and benefits to veterans.
My written submission addresses these breakthroughs in
detail, but I would like to quickly show you how the proposed
budget supports these priorities for veterans. And I think we
all agree on this.
First, the 2017 budget proposal will provide $2.6 million
for the MyVA program office to help integrate all the MyVA
initiatives across the enterprise. It increases by 47 percent
funding for our veterans' experience office so we can continue
training field employees on advanced business skills, sharing
best practices, and establishing high customer service
standards, and requests $171.3 million for IT systems that are
instrumental to improving the veterans' experience.
In support of our priority effort to increase access to the
point that veterans' clinical needs are addressed the same day,
they call or visit primary care facilities at a VA medical
center. The budget requests $65 billion for veterans' medical
care. That is a 6.3 percent increase over 2016. And it proposes
$66.4 billion in advanced appropriations for the VA medical
care programs in 2018. That is a 2.2 percent increase above the
2017 level.
The proposed budget provides an expected 35,000 veterans
access to hepatitis C treatment. It funds tele-health access
and it enhances health programs for women veterans. And $7.8
million is provided for mental health which continues to
support successful mental health care related prevention
programs.
We are committed to making sure that when veterans call for
new mental health appointments they receive suicide risk
assessments and immediate care if needed. Veterans already
engaged in mental health care who need urgent attention will
speak to a provider the very same day.
The 2017 budget includes $12.2 billion for care in the
community. It includes a new medical community care budget
account consistent with the VA budget in the Choice Improvement
Act.
Proposed IT investments will fund veterans' enterprise-wide
integrated services platform with best in class service and
satisfaction measures and expand veterans' access to self-
service tools and benefits information. Veterans should have
access to VA systems and know where to get accurate answers 24
hours a day seven days a week.
The 2017 request supports this priority by funding veteran
contact centers in the field and veterans' crisis line
modernization. To expand veterans' access to benefits they have
earned and deserve, the proposed budget supports increased
contracted disability exams at all regional offices.
And it proposes a simplified, streamlined, and fair appeals
process so most veterans could have a final appeals decision
within one year of filing. With your support, five years from
now, veterans could have a process that resolves 90 percent of
their appeals within one year.
To that end, the proposed budget requests a 42 percent
increased in Board of Veterans Appeals funding to $156 million
and a 35 percent increase in board staffing to more rapidly
address the growing inventory of more than 440,000 pending
appeals.
Under this plan by 2022, we could reduce appeals FTEs to a
sustainment level sufficient to process all simplified appeals
within one year. The simplified process makes sense for
veterans and it is an excellent return on investment for
taxpayers too. The proposed sustainment level is 1,135 FTEs
fewer than the fiscal year 2016 budget requires and 4,070 fewer
department-wide than necessary to address the appeals workload
with FTE resources alone.
The fiscal year 2017 proposal continues our progress toward
an effective end to veterans' homelessness by focusing on
proven prevention and treatment services and veteran
homelessness programs like SSVF, HUD-VASH, grant per diem, home
loans, and foreclosure prevention.
It provides services to about 65,000 homeless veterans or
those at risk. It prevents an estimated 36,000 veterans and
their family members from becoming homeless and provides case
management support for over 63,000 who receive HUD-VASH
vouchers.
It is no coincidence that the very best customer service
organizations are almost always among the best places to work.
So the proposal provides for the training that supports our
MyVA transformation.
In the same vein, the proposed budget will help us
significantly improve critical staffing levels that balance
access and clinical productivity and reduce time to fill
standards so we can move quickly to hire the people that
veterans need to serve them.
With the funding requested, we can continue transforming
our IT infrastructure to create a world-class IT organization
supporting veterans and our business partners and to do the
work necessary to build an enterprise-wide, integrated medical
surgical supply chain that leverages VA's scale to increase
responsiveness and reduce operating costs, were redirected to
priority veteran programs over $150 million in cost avoidance
savings from transforming our supply chain.
The proposal includes $78.7 billion in discretionary
funding. That is $3.6 billion above the 2016 enacted level
largely for health care. It includes $103.6 billion in
mandatory funding for veterans' benefits programs. For the
second time, the budget request VBA advanced appropriations. A
hundred and three point nine billion is requested to fund
compensation and pensions, readjustment benefits, and veterans'
insurance and indemnities for 2018.
And the 2017 proposal fully funds construction. These are
investments in the future and they are critical to providing
both quality care and timely benefits and first-rate facilities
that are safe for veterans and VA employees.
We will continue to work closely with the U.S. Army Corps
of Engineers, our construction agent, to execute two projects
over $100 million.
So with this budget, there is a lot we can change on our
own and we are doing that now. But many important priorities
that will make meaningful differences for veterans require
Congress to act on behalf of veterans.
You will find more than 100 legislative proposals in the
budget. Over 40 of them are new for this year, some absolutely
critical to even maintain our current ability to purchase non-
VA care. Here are just a few of the most important ones.
First, in this session of Congress, we can make significant
improvements to set the foundation for top-to-bottom
transformation and streamlining the VA's care in the community
programs based on proposals in VA's landmark road map plan set
out in our October 30th report to make these programs more
rational and to better serve veterans.
Second, the budget proposes a general transfer authority
that allows me some measured flexibility to transfer up to two
percent of discretionary funding across accounts excluding
medical care to address emerging needs and overcome artificial
funding restrictions on providing veterans' cares and benefits.
Third, it is critical that VA is competitive with the
private sector for top health care talent, so we are proposing
flexibility on the maximum 80-hour pay period requirement for
certain medical professionals. The private sector has this
flexibility and it makes sense in running a hospital. This
flexibility can both improve hospital operations and help
attract the best hospital staff who use and prefer more
flexible schedules.
Along the same lines, we are proposing critical
compensation reforms for network and hospital directors. Other
adjustments to VHA personnel authorities we are putting forward
also reflect common sense and good practice and best practices
from the private sector.
Fourth, we need your help to change VA's purchase care
authorities, provider agreements, and individual
authorizations, so veterans have access to clinically indicated
and timely care. Failing to address this requirement in the
weeks and months ahead impacts potentially thousands of
veterans receiving care from local non-VA doctors, hospitals,
nursing homes, and state veterans' homes.
Fifth, we are looking for congressional authorization of 18
leases submitted in VA's 2015 and 2016 budget requests as well
as authorization of eight major construction projects included
in VA's 2016 request. And we need your support for the six
additional replacement major medical facility leases, two major
construction projects, and four cemetery projects in the 2017
budget.
Six, passing special legislation for VA's West Los Angeles
Campus will get positive results for veterans in that
community, especially veterans most in need after years of
debate and court action as the Chairman said.
Seven, finally as I implied, we have to change the current
appeals process. Last year, the board was still adjudicating an
appeal that originated 25 years ago. The appeal had previously
been decided by VA more than 27 times. Conceived over 80 years
ago, it is unlike any other standard appeals process across the
federal and judicial systems. It is complex, it is confusing,
and it is ineffective.
Under current law without significant change in resourcing,
pending appeals are projected to soar by nearly 400 percent to
almost 2.2 million by 2027. Together we can do this and we are
open to ideas from the Committee and veteran service
organizations to make it work for veterans.
If we are serious about changing VA and better serving
veterans and their families, we can't keep kicking the can down
the road. This Congress, with today's VA leadership team, can
make these changes and more for veterans. Then we can look back
on this year as the year that we turned the corner, but we have
to be courageous and we have to work together to make that so.
This is my second budget cycle and I appreciate the support
that you have all shown to veterans, the department, and our
MyVA transformations. On behalf of veterans and the VA
employees serving them every single day, thank you for this
opportunity. Mr. Chairman, I look forward to your questions.

[The prepared statement of Robert A. McDonald appears in
the Appendix]

The Chairman. Thank you very much, Mr. Secretary.
According to the slide deck that VA provided yesterday, you
anticipate spending $1.7 billion in the fiscal year on the
Choice Program and we discussed this a little bit yesterday.
How much money is left in the Choice Program today or
close?
Secretary McDonald. As we talked yesterday, Mr. Chairman,
we expect the Choice Program funding to run out before the
budget year 2018. We will get you the exact number here.
Mr. Murray. I have that here.
The Chairman. If you would turn the mike on. Thanks.
Mr. Murray. Thank you.
So our estimate for the Choice Program for Section 801 for
2016 is $2.7 billion and under 802 where we provide care in the
community, it's $1.7 billion. In 2017, we estimate spending of
$969 million for Section 801 and $4.8 billion in Section 802.
And that rounds out the 10 and the 15 together and we can
provide you the details.
The Chairman. And you anticipate exhausting the funds when?
Mr. Murray. At the end of 2017.
The Chairman. So could you explain, and, again, we
discussed this a little yesterday, but can you explain the
discrepancy that VA states that the Choice utilization has
markedly increased in fiscal year 2016 and the low dollar
figure presented in the budget materials? In other words, why
are Choice expenditures estimated to be more than three times
higher for 2017?
Mr. Murray. Go ahead, Dr. Shulkin.
Dr. Shulkin. Mr. Chairman, as you know, and I think that
you characterized this correctly, the Choice Program got off to
a rocky start. We have been working very hard to get veterans
access to care through Choice and we have seen the results of
that. We are seeing increased authorizations in significant
numbers and that is leading us to the projections that we will
be spending much more money using Choice funds to serve
veterans.
The Chairman. The advanced appropriation requested for
fiscal year 2018 is nearly $2.5 billion short of the 2017
request and almost a billion dollars short of what was actually
paid in fiscal year 2015.
So how does the VA envision addressing the inevitable
budgetary shortfall that is out there?
Secretary McDonald. As we talked yesterday, Mr. Chairman, I
think what we are going to need to do is to come back with the
work that we do in the consolidation of care in the community
and come back with what we think the number will be for 2018.
Really the top priority for us is getting to that
consolidated program. As you know, in the consolidation plan
that we put forward, there were a couple options that we laid
out for the Committee. One was dealing with the emergency room.
One was also dealing with what we think could be incremental
demand from more veterans using the system.
What we have seen already and you reflected this in your
remarks is veterans already have a choice. Eighty-one percent
of veterans have some form of Medicare, Medicaid, private
health insurance. And as we continue to improve the care from
the VA and the care in the community, more veterans are going
to choose to use our system because our co-pays are zero.
And right now our estimate is the average veteran uses the
VA for only 34 percent of their care. If that increases one
percentage point, it is about a one and a half billion dollar
increase. So we need to get a better handle on this as we work
together on the consolidation of care in the community.
The Chairman. I think that the Committee was pretty clear
and the Congress was with the Choice Fund Program was intended
to supplement VA's community care budget. However, I saw in the
budget where it is assuming $7.2 billion for community care
funds which are distinct, should be distinct from Choice funds.
And that is less than what you had budgeted and spent in each
of the fiscal years 2013, 2014, and 2015.
So my question is, do you think that VA is compliant with
the intent of the Congress when the law was passed?
Secretary McDonald. I certainly think so.
Ed, do you seen any--
Mr. Murray. I don't. I did want to mention that we will get
a chance in the next year this time to revisit the
appropriation for 2018. So I just wanted to put that in there
once the consolidation and the care in the community
recommendations are made, we will get an opportunity to review
our numbers for fiscal year 2018.
Secretary McDonald. And, again, Mr. Chairman, I think the
most important thing is--we got to get the consolidation of
care in the community law passed and decide what is going to be
part of that, if the change in the emergency room structure is
going to be part of that, and then, we got to decide what the
demand is going to be. And we will work with you on future
budget numbers that will go with that.
The Chairman. And we would like to have a little extra time
to talk to you about what our assumptions are, and why we think
there may be an issue, whether it is a deviation, and maybe we
can all get back on the right track.
I have one more real quick question. The major and minor
construction requests are substantially lower than what you
requested last year. And I understand that is because we are
waiting for the study for the Joint Commission to come out
later this summer. And I think that is the appropriate thing to
do.
The 800 pound gorilla, if you will, is going to be if they
recommend closing underutilized facilities. Are you prepared,
Mr. Secretary, to full throatedly support that? Obviously you
will have to ask for our help as well.
Secretary McDonald. Mr. Chairman, as you know, for the two
last years, I have had in my written budget proposal
productivity improvements for the department. And I have
specifically culled out ten million square feet of unused space
that results in a charge to the taxpayer of $25 million a year.
And we have a number of these facilities where we need the
courage of the Members of Congress to help us close them, so
that we can turn those savings into productive use of funds for
veterans.
The Chairman. Thank you very much.
And Ms. Brown just said she has some facilities she would
like to put up on the chopping block, so I will yield to her.
Secretary McDonald. Whose district is it in?
Ms. Brown. Mr. Chairman, all I said was just as long as it
is not in my district, but I know every single Member feels
that way. We support that. And please don't charge that against
me.
I have a couple of quick concerns. That was a wonderful
conference you had last week on suicide prevention. And I want
to thank you for that.
But one of the things we learned, 22 a day servicemembers
commits suicide, which is totally unacceptable, but only three
of them are in the VA's system. What is VA doing to get those
veterans into the system and have you included that in your
budget?
Secretary McDonald. Yes, ma'am. Actually, what we said was
22 a day and 17 not connected to the VA system, so five. As you
pointed out, if we can get people connected to the VA system,
we know how to treat them and we know how to prevent suicide.
So outreach, as you described, becomes a very big issue.
And I will let David talk about what we are doing.
Dr. Shulkin. Well, first of all, thank you for personally
being there and to the Chairman and so many members that came
because we know this is very important to you and very
important to us.
This conference, as you know, was focused on this exact
issue, how do we get people that are isolated and not seeking
help back in. And what we essentially believe is, we need the
help of the community. VA can't do this alone. So we had at
this conference community groups, the Department of Defense,
many other organizations that we believe we need to work closer
with.
And the essence of this is, is that what we learned is, we
need to do a better job in the transition time. When a military
member leaves service and then gets in the VA, we need to make
that a much more thorough process to get people help.
We also have learned that we can do better in predictive
tools using big data analysis and using the research that is
actually done at VA to predict who is at greater risk. So we
are working on that and we are coming up with a plan 30 days
from the conference with very specific actionable steps that we
are going to put into place.
Ms. Brown. Let me add that women, one of the fastest
growing groups of the military, are committing suicide, and I
hope VA is targeting our female veterans, making sure that they
get the help that they need.
Secretary McDonald. We are. In fact, since the year 2000,
the number of women veterans seeking VA health care has
skyrocketed from 160,000 to 447,000. So we are putting in place
all kinds of programs which we can talk about, whether it is
having designated women's health providers at all of our
facilities or whether it is having a hundred percent of our
medical centers with women's advocates, having women's clinics,
having obstetricians, gynecologists. We really have to
transform the entire VA system to serve our female veterans and
that is a big effort for us.
Ms. Brown. And one more thing, the elderly veteran, the
Vietnam veterans are committing suicide as well. Most people
think it is the younger veterans, but it is really the older
veterans. So I am hoping VA is looking into that.
I have one other quick question. We had a hearing last week
about Hepatitis C and what we are doing as far as the
pharmaceuticals. And I know at one time that we wanted the VA
to work with the Department of Defense on the formularies so we
could keep that cost down for all of the people we service.
Can you give me an update on that issue because the cost of
the drug pharmaceuticals is unacceptable particularly since we
put the money up front?
Secretary McDonald. Our plan, the plan that you have got
here is to eliminate hepatitis C amongst veterans over about a
five-year period. We are in negotiations. There are alternative
drug treatments now and we are in negotiations to get those
costs down as low as we possibly can. And any savings we turn
up, we will obviously plow back into the budget to better care
for veterans.
Dr. Shulkin. I would just add with the Department of
Defense, we are coordinating purchasing our drugs together. And
we are using the Federal Government size and scale to be able
to get the best prices for taxpayers.
Ms. Brown. In closing, the VA and HUD need to work closely
together. In talking to lots of the homeless facilities, part
of the problem is the definition of the voucher. We don't want
veterans to be under a bridge before we can intervene and
provide proper housing and health care. So we need to work
together with those inter-agencies to make sure that VA is
doing the best thing to prevent homelessness.
Thank you, Mr. Chairman. I yield back the balance of my
time.
The Chairman. Yes, ma'am.
Mr. Lamborn, you are recognized.
Mr. Lamborn. Thank you, Mr. Chairman.
Mr. Secretary, I am very upset about the IG report, this
report that came out on the clinic in Colorado Springs last
Thursday. And I know you are here to talk about the $182
billion budget, but I have got to ask you about my district as
referred to in this report.
According to your testimony, looking at all appointments
nationwide in fiscal year 2015, quote, ``More than 97 percent
of 56.7 million appointments were completed within 30 days of
the clinically indicated or veterans' preferred date.''
But according to this report which looked at appointments
at the clinic in my district also in fiscal year 2015, only 36
percent of veterans were able to get an appointment within 30
days. There is 100,000 veterans in my district. Thirty-six
percent is a lot worse than 97 percent.
So either the 97 percent number you give us is unreliable,
or veterans in my district are getting extra poor treatment.
Which is it?
Secretary McDonald. As you know, Congressman, and I know
Deputy Sloan Gibson talked to you about this last Friday, this
report from the IG is about a year old, almost a year old. And
as a result, we have taken many steps since this report was
issued.
The clinic manager has been replaced. Sixteen additional
schedulers have been hired and we have consolidated training
and supervision and accountability. The bottom line is that
since March of 2015, Colorado Springs has been aggressively
implementing the Choice Program. Wait times are coming down. We
obviously have more work to do, but this report is about a year
old.
Mr. Lamborn. Well, as for accountability, will anyone in
the future be fired or can we say that anyone was fired? Heads
need to roll when something like this happens.
Secretary McDonald. Well, first of all, when I read the
report, what came out of the report to me was we did not do a
good job training people, not that there was malfeasance. I
know in your letter, you said deliberately falsified
appointment records to prevent these veterans from receiving
care, intentionally delay the medical care of our Nation's
veterans.
I read the report. I didn't see that. I mean, it is in your
letter, but I didn't see it in the report. I think if you read
the report closely, the IG did not make any kind of accusations
about people falsifying records or doing anything like that.
Mr. Lamborn. Well, I did review the report closely. And we
had that conversation, Secretary Gibson and me, but here is
what the IG report says. It says scheduling staff used
incorrect dates that made it appear the appointment wait time
was less than 30 days. Now, maybe it wasn't done maliciously,
but--
Secretary McDonald. Well, see, your letter again says
intentionally delayed the medical care, deliberately falsified
appointment records. That is not what is in the IG report.
Mr. Lamborn. Okay. When it says scheduling, the IG says
scheduling staff----
Secretary McDonald [continued]. The people were poorly
trained. They were poorly trained and we admit that. And as I
said, the clinic manager has been replaced. We have hired 16
additional schedulers. We have also consolidated training and
supervision. This is a training issue and--
Mr. Lamborn. Well--
Secretary McDonald [continued].--we are after it. And that
is why the care has improved, but we need to go further.
Mr. Lamborn. Whether it was done maliciously or not, I
think the records were falsified and I think that that is a
correct term to use. And I think someone needs to be fired for
this.
The person that was let go, was that person actually fired
or were they just allowed to be transferred or allowed to
retire?
Secretary McDonald. Mr. Chairman, maybe we should make the
IG report a matter of the record so that the American people
can read this because the investigation makes no such
accusations.
The Chairman. It is already publically available now on the
IG's Web site, Mr. Secretary.
Secretary McDonald. Yes, sir.
Mr. Lamborn. Let me ask you about the Veterans Choice Act.
We talked with someone out of this same part of Colorado who
said she did not agree with the Choice Program and quote, ``The
VA will always take better care of veterans than the community
and that the community is not capable of taking care of our
veterans.''
Mr. Secretary, I perceive widespread defiance and
resistance to the Choice Act. Is that something that we are
going to still have to face in the future, or is there going to
be a better attitude on the part of VA bureaucracy?
Secretary McDonald. I don't perceive that, but we are going
through a process right now called leaders developing leaders.
It is a program that we put together to train all the leaders
in the VA. We have trained over 12,000 leaders so far. Part of
that training is basically sharing with everyone the vision
that the optimal network of the future includes inside VA care
and care in the community.
So if you find someone who you think doesn't understand
that, please provide us the name and we will certainly share
our vision with them. But I think everybody gets it.
The Chairman. Mr. Takano, you are recognized.
Mr. Takano. Mr. Secretary, you HAVE shared with Members of
this Committee in a variety of formats your vision for moving
the VA toward your vision of care in the community. I want to
let you know I support what you are doing, and hopefully, we
can all work together to make sure that we enable you to
consolidate all of the various care in the community programs.
But I have some questions about some other parts of your
budget and maybe you or your cohorts can help explain. The
fiscal year 2017 budget requests $567 million for substance
abuse, an increase of only $9 million from fiscal year 2016 and
a decrease of $57 million for your estimate of last year.
Can you explain this change in estimate with the ever-
increasing opioid addiction crisis facing our states?
Dr. Shulkin. VA has prioritized the issue of substance
abuse. There is no question about it that this is a growing
problem. We have put together some new efforts to be able to
address this. We think that the budget request that we have
submitted will allow us to be able to focus on this and
increase our efforts to be able to make an impact on this.
We have just joined a White House effort to be able to
address heroin abuse in the rural areas that is being led by
the Secretary of Agriculture that VA is participating in. We
are working with other federal colleagues and other agencies to
be able to help address this.
But we are very interested in doing more, and if there are
other ways that you think that we should be stepping up or
other ways to do it, we will use whatever resources we have to
be able to address this.
Secretary McDonald. I think I would say, too, that opioid
use across VA, and, again, just the general average is down,
and the use of alternative treatments, we are finding more and
more successful, whether it is equine therapy, acupuncture,
yoga. We will try anything in an evidence-based way that works
and we are seeing great success with these alternative
programs.
Mr. Takano. So you are noting a decrease in opioid abuse,
but what about overall substance abuse?
Dr. Shulkin. You know, as the secretary said, we have shown
that we actually have 16,000 fewer veterans on prescribed
opioids, so we are making progress there. We still have more
work to do. The illicit drugs being used and heroin are a
national epidemic and unfortunately we are seeing that also
increase in the veteran population.
So we need to be doing more and we are engaged in looking
for ways to make our programs more effective and to do better
outreach. VA has huge programs in substance abuse as you
identified.
Mr. Takano. Well, how are you sharing your best practices
throughout the VA?
Dr. Shulkin. We are doing research that we publish on this
and so that is available throughout. You know, once we publish
it, it is available to the scientific community. We are holding
conferences on this. We work with SAMHSA, the other federal
agencies that are involved in substance abuse on a regular
basis. We are working with the CDC on efforts in substance
abuse as well.
But, you know, this is such a national epidemic and such a
crisis for veterans that we are very open to new ways, new
ideas to be able to effectively treat veterans.
Secretary McDonald. And some of the work that we have done,
I have actually spoken at groups, associations of doctors
worried about reducing pain medication. I did one in West
Virginia. I know David has done some. I have spoken to the
American Medical Association. I have spoken to the Institute of
Medicine.
We have got to play a leading role in using our evidence-
based alternative therapies as ways to get people off of
opioids and also to deal with the substance abuse issue that is
national.
Mr. Takano. Well, I note that you are increasing your
mental health budget significantly and perhaps there is some
spillover there. But I want to--quickly before my time runs
out--get a question in about, you know, the shortage of health
care providers around the country and whether you believe your
budget includes the resources that are necessary to maintain
and expand the VA graduate medical education in order to
recruit and retain health care professionals.
Secretary McDonald. We do, but there is a critical piece of
legislation that we are asking for help for, and that would be
the 80-hour work week which will allow us to hire people into
emergency rooms and work flexible schedules.
Also we are asking for Title 38 categorization for our
medical center directors. Our medical center directors who are
not Title 38 are paid roughly half of what is made in the
private sector. As a result, we have a number of vacancies that
we are trying to fill. So to be competitive, we need those
pieces of legislation passed.
Mr. Takano. But as far as medical school education, though?
Secretary McDonald. Medical school education, I have been
to--
Mr. Takano. I mean, graduate medical school.
Secretary McDonald [continued].--over two dozen medical
schools recruiting. I find that our problem recruiting is not
that difficult and that we are outreaching. Most of the medical
schools will tell you they can increase their throughput, but
that they need the residencies.
And I know we are in conversation with Dr. Roe right now
and the Doctors Caucus at getting more resident positions that
we can put against primary care, mental health, and in the
rural areas because that is where the need is great in the
country.
Mr. Takano. Okay. Thank you.
Dr. Shulkin. Thank you.
The Chairman. Mr. Bilirakis, you are recognized.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
Welcome, Mr. Secretary. Thank you for your testimony Also
thank you for taking my call the other day with regard to the
Wounded Warrior that needed assistance and thanks for following
up. I really appreciate it so very much.
Mr. Secretary, again, the President's budget includes a
request of $7.8 billion for mental health programs and efforts.
It is encouraging to hear that more and more veterans are
utilizing the VA or DoD to treat their invisible wounds which
has increased yearly again. However, the heartbreaking
statistic is the 18 to 22 veterans taking their lives daily
delves deeper into the discussion regarding the effectiveness
of our current programs.
Does the VA track data regarding how many veterans that
started VA programs to treat their mental health issues,
finished the treatment programs and are the mechanisms in place
to survey the veterans opinion on the successes and areas for
improvement because one size does not fit all? And I understand
that veterans start these programs and sometimes do not finish
them and have nowhere to turn.
That is why it is very important that we get these
alternative treatments at the VA on a regular basis. I want to
ask you that question too. How many treatments, I know you
brought it up, but how many complementary alternative treatment
programs such as equine therapy, service dog therapy, yoga,
what have you are there? Do our veterans have access to these
programs on a regular basis?
And in my opinion, we need to expand these programs, and I
filed legislation to do so. Of course, they must be evidence
based, but I want to ask that question if you have again these
programs within the VA, are we tracking them to see how many
veterans finish those programs and how effective they are?
Secretary McDonald. Yes and yes. We need to track these
veterans very closely because the number one cause of missed
appointments are people with mental health care appointments
and so we need to track them very closely.
I am pleased to tell you that we had a situation in
Vermont, White River Junction where we had a veteran not show
up for an appointment and one of our nurses seeing that veteran
didn't show up. Rather than following the rules, and we are
talking about changing our organization from a rule-based
organization, a principle-based organization, she contacted the
VA police.
The VA police contacted the local police. They went around
the house. They discovered there weren't footsteps in the snow.
Neighbors hadn't seen this individual. They actually broke into
the house and found this veteran lying on the floor wedged
between two pieces of furniture. The person would have died if
this nurse hadn't been tracking that appointment for that
veteran.
We have celebrated that nurse's behavior. We have
celebrated her principle-based way of operating. And it was my
honor to celebrate both of them recently for what they did. And
we are using that as an example to all of our employees as to
how we should think about the veterans we serve.
David.
Dr. Shulkin. I would just, Congressman, you have identified
a very, very tough issue in the treatment of mental health
disorders. Our no-show rate for mental health appointments is
21 percent. So you are absolutely correct.
Mr. Bilirakis. That is unacceptable.
Dr. Shulkin. Yeah, very, very difficult. This, of course,
is the same thing that you find outside the VA system.
The VA is absolutely trying to target this issue of
noncompliance. We are doing more than I have seen anywhere
else. We use peer counselors to be able to help with this. We
have our vet centers, 300 of them across the country as another
source of a place to get information and bring back into the
system.
But every one of our suicides we do what is called a root-
cause analysis to look specifically at this issue. What could
we have done better to bring people in? I was reviewing a root-
cause analysis today where we actually walk the people over to
the schedulers to make sure that they scheduled. We can't force
them unfortunately to show up and that is where our
noncompliance rate is, so--
Mr. Bilirakis. Are there mechanisms in place to survey, you
know, to get the option of--
Dr. Shulkin. Yeah.
Mr. Bilirakis [continued].--the veteran with regard to
these programs if they are effective?
Dr. Shulkin. This is what I would call research where we
are looking at different ways to improve compliance. We have
two facilities right now that are surveying veterans using
functional scores every time they visit to look at this issue.
We are trying to learn what works so we can spread that.
Mr. Bilirakis. Okay. We have a $7.8 billion budget.
Dr. Shulkin. Yes.
Mr. Bilirakis. Okay. How much is going toward these
alternative and complementary treatments?
Dr. Shulkin. Yeah, that would be outside. The alternative
complementary treatments are in our patient center, a different
medical services budget. And, again, VA has one of the largest
programs of these integrated medicine or alternative medicine
type facilities that we are continuing to learn what works and
spread it throughout the system.
We have more to do because not every facility has access to
this. The type of workers that are experienced and trained in
this are somewhat limited, but we are continuing each year to
bring more of these services to our facilities.
Mr. Bilirakis. Thank you very much.
And I guess my time has expired. Thank you, Mr. Chairman.
Appreciate it.
The Chairman. Ms. Titus, you are recognized.
Ms. Titus. Thank you, Mr. Chairman.
Thank you, Mr. Secretary. I have a couple of issues. I will
just throw them all out there and then ask you if you would
please address them.
First and foremost, the appeals process, you heard it said
so many times that I see this as a new tsunami that we need to
try to address before it continues to get worse. And your
figures are pretty compelling and that argument 440,000
currently taking 25 years. And I appreciate very much that you
have given us a chart to simplify this process and that you
have asked for additional resources.
I would ask you, though, of those 300 additional FTE, I
think it is called non-related workload, how many of them will
actually be our workforce? How many of them will actually be
working on appeals and also when can we expect to get some
specifics about the legislative changes that need--we need to
make?
We talked and I appreciated that. And I have also reached
out to the VSOs to say give us your recommendations because we
need to get busy on the legislative side. And so we need some
specifics on that.
The second thing I would ask you about is the medical
research. You have in the budget $663 million which is an
increase of about $33 million for medical research. And we have
talked about this before, the need to do research on medical
marijuana as an option. And I would ask you if any of that is
scheduled to go for medical marijuana research and, if not, if
we could work together to try to make that happen.
And then third, and this is something that is happening in
my district, and I have brought it up before, about veterans'
nursing homes. I realize that the VA provides grant money to
the states, and then the states, through Medicare or Medicaid,
are then responsible for them. But I wish we could look for
some way for the VA to have a little more oversight of those
nursing homes because some of them just really aren't operating
up to standard and the VA doesn't seem to go back and check on
them very often. And I wondered if there was somewhere that
could go in the budget.
So those would just be my three areas of interest right
now.
Secretary McDonald. We will take them one at a time. We
will start with appeals. Let me get some facts out on the
table. So about 11 to 12 percent of veterans appeal their
decision. Of that 11 to 12 percent, if you took the percentage
of total, about two percent of veterans, two to three percent
are responsible for about 45 percent of the appeals. So what is
happening is you have people appealing and appealing and
appealing. Some have appealed for 80 times. Some have appealed
for multiple years.
We have had conversations with the veteran service
organizations about what the change in law would look like, and
we shared some thoughts yesterday with the Ranking Member and
the Chairman. And this is going to take a team effort, and so
we are going to have to all get together and decide what the
change in law is.
We put a strawman in our budget proposal, but, again, it is
just a strawman for people to react to. And we will be working
that collaboratively over the time.
You asked how many people. Danny, how many people?
Mr. Pummill. The Congresswoman--for fiscal year 2016, you
gave us 730 people to add to our non-rating work load, and we
part a large number of those into the appeal process on the VBA
side. We have an additional 300--we actually hired them in
2015, so we get them hired and trained up to be ready to go in
2016.
The next batch, the 300, we are going to put 100 into
appeals. On the other side, and the Board of Veterans Appeals,
their budget was increased by $46 million, and they are going
to increase the number of judges and appellate people they have
on their side to do that.
So the combination with the increased budget at the VBA,
the increased people they are going to put on the job, the
extra people that we are going to put on--on the VBA side, and
if we can get some kind of reform, all that combined together,
we think we can attack this problem and solve it.
Medical marijuana I will let David handle.
Dr. Shulkin. Yeah, Congresswoman, I am not aware that VA is
doing any research right now on the medical impact of medical
marijuana. I would be glad to work with you on that issue. It
is an important issue right now. We are not doing that.
On the state nursing homes, VA, as you know, funds this
through a matching program, but does not have the
responsibility for quality oversight. All that we have right
now is a annual inspection. Again, if there are specific
concerns on that, and you think that we should have a more
active role in that, be glad to work with you on that.
Ms. Titus. Well, thank you. I appreciate that. I would like
to look at that. And I also think that as more and more states
legalize medical marijuana and veterans do not have that as an
option, we need to look at that, and if you think we need more
testing--which I agree with--then we should be doing that
testing.
And as for the appeals, we have got to get a legislative
solution. Now, you can't just keep putting more people and and
more money. That is not going to solve it. So Dr. Abraham and I
are on that Subcommittee for disability. I appreciate working
with him, and please keep us in the loop as you come with some
of these suggestions, I would say.
Secretary McDonald. Yes, ma'am, and as you know in my
testimony, I actually talked about reducing the number of
employees once we get this resolved with the law. Thank you.
Ms. Titus. Thank you. Thank you, Mr. Chairman.
The Chairman. Dr. Roe, if you would yield just for a
moment, Ms. Brown has a question.
Ms. Brown. Yeah, I have a question to the Secretary. My
understanding under the medical marijuana, we, in Congress,
prohibit you all from doing anything. Is that correct?
Secretary McDonald. We are not allowed to prescribe medical
marijuana. We can have--our doctors are permitted to have
discussions with their patients in states where medical
marijuana is legal about the use of medical marijuana, but we
cannot prescribe it as an agency of the federal government.
Ms. Brown. Thank you. I yield back.
Secretary McDonald. Dr. Roe.
Mr. Roe. Yes and just for the record, on the medical
marijuana issue, it is a sore spot with me. It ought to be
studied like any other chemical, and it has not been. And you
know, ``I feel good,'' is not science. That's how you feel.
And so I think we need to study it like any other chemical.
I totally agree that it is not science based. And so there is
no science right now. I just reviewed this whole business of
medical marijuana. There is no science about the medical
marijuana benefit. So anyway, that is a different issue.
I wanted to bring up just a couple things very quickly to--
a study was published just about three or four days ago that
showed that death rates and re-admissions at VA hospitals for
heart attacks, heart failure, and pneumonia were similar--it
was in the JAMA--were similar, almost identical, to the private
sector.
So I think it speaks that the quality of care the veterans
get once they are in is comparable to the outside, and I think
that is a shout out, and I think that is science right there. I
think that what we need to do is make it easier. Obviously--and
you are trying to, I think, Mrs. Secretary, for veterans to
access the care there. So I think once they are in the system,
the care is comparable. At least this study in JAMA definitely
showed that.
Just two or three things I would like to talk about. One is
homelessness. That is something to me, I think it has been an
emphasis of mine since I have been here. I want to have you
comment a little bit on that.
I think you mentioned about principal care, and I would
just think that is putting the patient first. And that is what
this nurse did, that is what nurses do. It is what doctors have
done forever. And I think the system has prevented that
sometimes from happening. And I think it is a shout out to this
nurse, who just did not care what the system was. She cared
about her patient. And I think that is what we need to have.
That attitude needs to come from the top down, and I think it
is beginning to.
So, first start with homelessness. We have discussed the
disability backlog. Obviously, it is better than when I came
seven years ago. There were a million claims when I came here
and first sat on this Committee, so.
And the last thing I want to talk about is, I think it is
critical for the long-term future of the VA, is the
implementation of the VA residency programs and make sure we do
that right. So I will stop.
Secretary McDonald. I will start with homelessness and
David can deal with the medical issues. On homelessness, we are
making progress. I mean, homelessness, veteran homelessness, is
down 36 percent since 2010. Unsheltered veteran homelessness is
down 50 percent. That is all good. But we are getting to the
point now where we literally know the veterans who are homeless
by name. We literally know them by name. And as the Chairman
said, and I appreciated his comment, the work that we have done
in Los Angeles is largely about homelessness, because Los
Angeles compared to other cities around the country is the
place where there is virtually twice as many as you would find
elsewhere. I mean, some of the cities who have claimed an end
to homelessness have housed the number of people over a year
that Los Angeles has to house in a month. I mean, it is that
big of a problem.
And we were prohibited on our campus from doing extended-
use leasing, which we do. We work with partners, private sector
partners, who build residences for us. We have one in Palo--or
Menlo Park, which is just, you know, not far from Los Angeles.
So as soon as we get that legislation, we are going to be
working very, very quickly. Our master plan has a commitment
for 1,200 beds in Los Angeles.
After Los Angeles it is San Diego. And what we are finding
is the areas we need to work--and I will be quick about this--
number one, is we need landlords to rent for the HUD VASH
voucher amount, or we need to change the HUD VASH voucher
amount. In Los Angeles, we have changed the amount twice.
Number two, we need developers willing to build these
buildings for us, willing to get a rate of return on housing
these homeless veterans. Number three, having the caseworkers
to do the wrap-around cure. We hired about 300 for Los Angeles.
So we are making progress, but there is still a lot of work
that needs to be done.
Mr. Roe. What you pointed out is, is what we found, is the
housing stock.
Secretary McDonald. Yes.
Mr. Roe. And if you have a chance to visit, we will take
you by some developers who have accepted what the HUD VASH
Voucher pays and provide that housing stock.
Secretary McDonald. Love to do that.
Dr. Shulkin. Dr. Roe, I would just say I am very impressed
that you are able to keep up with the medical literature. The
study that you referred to in the Journal of the Medical
Association was just released yesterday. It actually showed
that VA has statistically better mortality for acute myocardial
infarction and for congestive heart failure than the private
sector, which I think has surprised a lot of people, but it
does not surprise us, because consistently, VA has had either
equal or better performance when it comes to mortality compared
to the private sector. So thank you.
Mr. Roe. I yield back.
The Chairman. Another interesting statistic in L.A. is they
are at one percent, I think the number was, vacancy rate. I
mean, it is astronomical. There just isn't anything there to be
rented out, and that is why this master plan, I think, is so
critical. Mr. O'Rourke, you are recognized.
Mr. O'Rourke. Thank you, Mr. Chairman. And Mr. Secretary, I
would like to thank you and your team for the presentation
today and all of the work that you have contributed to
improving access to care for our veterans, and all the other
responsibilities within your purview.
I want to, in addition, commend you for the focus on mental
health access and treating veteran suicide like the crisis that
it is, and meeting that crisis with a sense of urgency. So the
$7.8 billion to improve mental health access is certainly
welcomed.
I would ask that in addition to your comments, that it be a
standalone priority within the VA, much the way reducing
veterans homelessness is a standalone priority, I think veteran
suicide is just that serious, and we still are in a crisis. And
I think articulating that from the very top that this is, in
addition to overall access to better health care, physical and
mental, reducing veteran suicide is a priority. I think the
more we say that, the more we act on that, the more we follow
through, the better outcomes, the fewer deaths. This is wholly
preventable, and I just, again want to thank you.
Secretary McDonald. Congressman O'Rourke made a suggestion
to us when we met and went through our 12 priorities for the
year to call out vet suicide prevention. We had it there, but
we did not have it called out as explicitly, and we have
changed that. So we thought it was a good suggestion. We do
listen, and we do look for your comments. So we do try to
improve.
Mr. O'Rourke. Thank you. I really appreciate that. On that
same note, we know that access--I think we know, I certainly
feel this way--that access to mental health is connected to
successful suicide prevention and treatment for those who have
suicidal ideation.
As you know, in El Paso, but throughout the country, we
have critically underserved areas when it comes to mental
health. To use El Paso as an example, we have the same mental
health staffing today that we did in September of 2014, when we
really became aware of how critical the crisis was in El Paso.
And I know that Dr. Shulkin and Gail Graham, the interim
director, Brian Olden, had a mental health in El Paso, are all
doing amazing work, and yet it is not working.
And I want to know what we are going to do to elevate it
beyond where you are today to recruit those providers to
underserved communities like El Paso. Because I know that those
providers will prevent suicides. They will save lives if we can
get them in our communities. So what additional flexibility do
you need to pay them more, to forgive more of their medical
school debt, bonuses to retain them in place if they are
performing according to the standards that we have set for
them?
And what can we do to implement the very exciting proposal
that Dr. Shulkin presented in October, which would have us
leverage partnerships for what I would call non-VA core
competencies, and elevate those conditions like PTSD and
traumatic brain injury that are uniquely connected to combat
and service?
So don't hire the podiatrist to know, you know--no offense
to podiatrists and people with issues like that--but that can
be seen in the community. I am sorry, Brad. But that
psychiatrist, we are going to focus almost mono-maniacally on
getting that psychiatrist into our medical centers to the
exclusion of some other types of providers whose capacity is
already represented in the community.
Secretary McDonald. You know, I think, as we have worked
together on our relationship with the local medical school in
El Paso, to me, the top priority has got to be getting more
residencies in there for mental health. There is just no
question about that.
David and I have talked that as we put these residencies
out, mental health, primary care have got to be some of our top
priorities, and then making sure those people locate in the
rural areas where we need them.
We are fortunate in a way that we don't have the issues
that the private sector has with mental health where the CEO of
Massachusetts General told me every mental health patient that
walks in the door, he loses $100. We don't have that. So we can
get mental health professionals working for us. We need to have
the residencies and then need to work with the medical schools
to create the throughput.
And then I think what we are going to need to do--we do
have some flexibility on reimbursement of medical school debt,
and we do have flexibility on incenting people locating in
rural areas. But I think if we could make that even more, that
would be helpful, and we will come back to you with specifics
on that.
Mr. O'Rourke. I would appreciate a specific request, a
level to which you need flexibility to bring these much-needed
providers in underserved communities.
Dr. Shulkin. I also just want to thank you for your
efforts. Through your efforts, we have worked with Texas Tech
to be able to recruit additional psychiatrists into working in
the VA.
Very important to work with the community. We can't--as you
know, we have 116 openings in El Paso. We have only been able
to fill 91; 21 percent vacancy rate. So we need to work with
private partners.
I also want to thank you for your offer to go out and help
us recruit. And I am going to take you up on that offer. We are
going to go out and we are going to recruit together. But we
need everybody's help to let people know that if you are a
mental health professional, the VA needs you. We want you.
There are jobs available. Please come and work with us.
Mr. Roe. Thank you, appreciate that. Thank you, Mr.
Chairman.
The Chairman. Dr. Benishek, you are recognized.
Mr. Benishek. Thank you, Mr. Chairman. Well, good to see
you all again. I got a couple things I want to touch on. One is
a sort of a specific item that came up to me yesterday,
frankly. I had the--oh, no, the third-party administrator--
Health Net, their representative come in to talk to me
yesterday. And I asked them, you know, what are some of the
problems with implementing the access in the community?
And one of the surprising things that she, the
representative, told me that a lot of the cases, they have a
hard time discerning what the VA wants for a provider. And that
is because, apparently, the person who is actually making the
consultation writes a brief note like, I need a thoracic
surgeon for a thoracic aortic aneurysm. But by the time the
third-party administrator gets it, it is a 30-page thing that
they have to get a professional in there to kind of read
through the 30 pages.
Apparently, once the physician makes the request, some
other bureaucrat gets hold of that request, adds a lot of the
record to it, and they tell me that is a major delay in getting
people to the right person.
So I do not know how much you are familiar with that, maybe
Dr. Shulkin is. But can you just please address that to me and
see what you can do to fix that problem?
Dr. Shulkin. Yes. I think the process is very complex, and
so we were meeting with the same person you probably were from
Health Net the other night in the Secretary's office, and what
we agree is, is that we need to be together doing this. And, in
fact, we have started pilots throughout the country where we
embed the staff from the DBA with the VA people, so it is not
phone calls and faxes, but doing this together. So--
Mr. Benishek. Right. Well--
Dr. Shulkin [continued]. You are correct.
Mr. Benishek. I just want to--that's one of the concerns I
had with a third-party administrator is all of a sudden we got
two bureaucracies now. We have the VA bureaucracy, and we have
the third-party administrator bureaucracy. And this is a
communication issue between the two of them. I don't know what
the solution is, if it is better to have an outside
bureaucracy, a private sector bureaucracy, or the VA
bureaucracy. But having the two of them--
Secretary McDonald. No. I think the solution is treat them
as one, and then use Lean Six Sigma to go through and lean the
process, so it becomes very linear. And that is what we are
going to do.
Mr. Benishek. Well, that sounds pretty technical, and I
don't understand what it--
Secretary McDonald. It is what business people do every
day.
Mr. Benishek [continued].--what it means. Let me just go
into one more thing, and then I want to change the pitch a
little bit. The Chairman mentioned in his opening comments
about Mr. Gibson's frustration with a process that occurred,
apparently, in Albany for a medical director that was attempted
to be disciplined in some manner and then got thwarted by the
courts. Can you kind of tell us more about that, because I want
to be sure that you have the tools necessary to do the
appropriate discipline. That is what we are talking about all
the time.
So what went wrong there? What is the story? Is there
something we need to do? Can you kind of go into that a little
bit more? I am just not familiar enough with it.
Secretary McDonald. The Chairman was talking about three
particular instances, where Deputy Secretary Gibson, as the
deciding authority, decided certain punishment as it pertains
to three senior executive service employees. Those three
appealed to the Merit System Protection Board. And in each of
the three cases, the Merit System Protection Board--well, it is
hard to generalize for the three, but basically in two of the
cases, they said it looks like what he said was right, that
they lacked judgment in what they did, but they vacated the
punishment because we didn't punish more people than just them.
And what Deputy Secretary Gibson said, and we agree, is
that it seemed less like the Merit System Protection Board
judges didn't understand the intent of Congress or our intent,
in punishing those employees. As a result of that, we had a
discussion last night with the Chairman and the Ranking Member
about an idea we had. It was actually Deputy Secretary Gibson's
idea that we make all VA employees Title 38, so that--because
we are like a business, we happen to be a--if we were a
company, we would be a Fortune 6 company--treat everybody in VA
as a Title 38 employee, which would give us more flexibility in
terms of paying them competitively in the medical community, as
well as giving us greater flexibility in disciplining them
without all of the things that happen with the senior executive
service.
So we have put that proposal forward. We have to do a lot
more work on it. It is just preliminary. But we are going to
work with the Chairman and the Ranking Member to do that.
The Chairman. Thank you, Mr. Secretary. And if I could, Mr.
Secretary, a point of clarification, it is not all VA employees
under Title 38, but the SES level. Because I--
Secretary McDonald. I am sorry, yes, sir. You are right.
The Chairman [continued]. You just lit a fire that--
Secretary McDonald. No, I did--Mr. Chairman, thank you for
covering my back.
The Chairman [continued]. Anything I can do for you, Mr.
Secretary. Ms. Kuster, you are recognized, and I apologize for
missing you before.
Ms. Kuster. That is all right. Thank you very much, Mr.
Chair. And thank you to the team here today for presenting the
budget in such a coherent way. We appreciate it. I just wanted
to follow up on Mr. Takano's line of questions and just to give
a shout out to Mr. Coffman and the Oversight and Investigation
Subcommittee. We are going to be doing a regional hearing in
New Hampshire on the 4th of March with the folks from White
River Junction VA about the alternative remedies that they are
using for to avoid--to bring down--the opiate prescriptions,
and I think we will be introducing legislation on best
practices and moving that across the VA.
And my hope would be that the VA, frankly, can be a leader
nationally in bringing a bend in the curve on this opiate
crisis. One of the things that we have learned in New Hampshire
is that four out of five of our heroin addicts, where we have
been particularly hard hit--400 deaths last year--started on
prescription medications. So we are really focused on that
generally.
But also four out of five have co-occurring mental health
disorders. And so my questions, along with Congressman
O'Rourke, are how we can bring more treatment, mental health
treatment, in the VA to the rural areas. And maybe we could
consider legislation not just for physicians, but for
therapists to encourage them to come to rural areas by
alleviating their school debt. So that is one issue.
The other issue, and just focusing in on these evidence-
based alternative therapies, I know that one of the problems we
have--and this goes to, actually, from the Affordable Care
Act--using pain as a fifth vital sign and adds an indicator of
quality.
Again, our bipartisan task force is working across the
aisle. I am working with Representative Mooney from West
Virginia on this. Is there anything in the VA where you are
still using pain management as an indicator of quality that
might be encouraging prescribers to use too much opiates, and
can we help to turn that around? And would spreading these best
practices help? And I will end there.
Secretary McDonald. Let me deal with the rural area medical
infrastructure first. We had an interagency task force meeting
on rural poverty, and the President was there, Sylvia Burwell,
who is the Secretary of HHS, Tom Vilsack, Secretary of
Agriculture. And we had a long discussion about this medical
infrastructure. I really do think there is a big opportunity to
improve the medical infrastructure in rural areas.
I know as a former CEO, when I would decide to put a plant
somewhere, you look for infrastructure. You look for roads. You
look for electricity. You look for water. You also look for
medical care.
And so we had a discussion about this, and many of the
ideas that we have talked about, I think are actionable for us,
because VA trains 70 percent of the doctors in the country.
Ms. Kuster. Right.
Secretary McDonald. So we need the residency slots. Then we
need to work with the schools to create the residency training,
because obviously, it is difficult to create that kind of
training program and frequency in a rural area, given its
location. So this is a ripe area for us to work together, I
think, to really help our country. Ask David on the opioids.
Dr. Shulkin. Yeah, Congresswoman, I appreciate you bringing
this attention again on this issue of opioid misuse and what we
can do. VA has already begun to address this, but it has a lot
more to do. As I said, we have 16,000 fewer veterans today
taking opioids. We are using routine urine tox screens to
identify people who are taking multiple drugs. Because you are
correct about the comorbidities of mental illness.
We have started what is called academic detailing, which
means that rather than going and talking to doctors about how
to use drugs like the pharmaceutical industry, we actually try
and teach about the appropriate use of drugs and how they can
avoid and use alternatives to opioids.
So we do see VA as a national leader in this. We do think
we need to do more. We are focused on this. We are looking
forward to that hearing and seeing what else we can do.
Ms. Kuster. Well, and just quickly, I am the co-chair of a
bipartisan task force on ending the heroin epidemic, and we
would love to work with you, maybe some kind of a national
panel/symposium, on how we can use the lessons from the VA to
help civilian-side prescribing habits, so. Thank you very much.
I yield back.
The Chairman. Mr. Huelskamp, you are recognized.
Mr. Huelskamp. Thank you, Mr. Chairman. I appreciate the
topic of consideration today. And Mr. Secretary, I appreciate
the visit to my office yesterday, and I particularly was
pleased by your continued commitment to work to make Veterans
Choice permanent. And I think that is a critical item that we
do need to pass.
And we discussed a number of things, and I would like first
to ask Dr. Shulkin to follow up on one thing we talked about
that--you know, I have 70 community hospitals and about 1,000
other providers now in the network for Choice. You have
announcement, I guess, of a way we can reduce the paperwork and
simplify some of that process for our providers?
Dr. Shulkin. In terms of getting them paid?
Mr. Huelskamp. Yes, and some--
Dr. Shulkin. Yes, yes.
Mr. Huelskamp [continued].--of the paperwork mandates that
you had when you first implemented Choice.
Dr. Shulkin. Right. Yes. Having spent my life trying to get
paid for managed care companies, I am very sensitive to this. I
believe that if you treat our veterans, you deserve to get paid
and paid timely.
So we are--the major thing that we can do--and we will do
this in the next two to three weeks--is--we will de-couple the
requirement to submit all the medical records in order to get
paid.
So, in other words, if you have a authorized claim, or an
authorized claim that has been submitted to us, we will pay you
and not require that you have to give us all of the medical
records first. That will bring our payment rates up by almost
20 percent above where they are now.
Mr. Huelskamp. And that will be implemented when?
Dr. Shulkin. We are waiting for final contracting approval
within VA, we hope within two weeks.
Mr. Huelskamp. All right.
Secretary McDonald. That is the best practice in the
private sector.
Mr. Huelskamp. Absolutely. And I appreciate that. Again, I
have a lot of providers, 70 community hospitals, and they want
to help. And they also would like to get paid, and they also
would like to cut through the paperwork. So I appreciate that.
The other question is--I would like to mention that I know
Mr. Pummill had mentioned, I think it was at a hearing late
last year, he said it was almost impossible to discipline most
VA employees. And Mr. Secretary, do you agree with that
statement, and if not, why?
Secretary McDonald. I wasn't at the hearing, so I think the
solution that we have talked about for SES employees is, for
me, the, you know, the answer to the question. We have
terminated about 2,600 employees. That does include the
expiring of probationary periods. We have 20 employees from ten
locations that have been disciplined for scheduling errors.
So, I guess, I would not agree with your statement, Danny.
I don't know the context of it. But I would like to move
forward on exploring what we need to do to get our discipline
for SES employees effected.
Mr. Huelskamp. So, Mr. Pummill, could you explain--expand
on that? And do you think the proposed legislative change would
fix the issue? We do have--I believe we do have a problem.
Mr. Pummill. I still stand by my statement that I made last
time. I made it in the context that it is too hard. It takes a
lot of time, a lot of effort, a lot of money. Time, effort, and
money that should be used taking care of veterans to follow
rigid rules and procedures and policies.
I do think what the Secretary has proposed with the Title
38 with the SES would go a long way, not just to helping us
hire better people, but with the long-term disciplining of
people out there. That is a good start. But I also agree with
the Secretary that we have got to concentrate on this budget
and move forward and get going on stuff.
Mr. Huelskamp. Absolutely. And the Secretary and I talked
about the VA Accountability Act, and there are some provisions
in there definitely would help that, if the Senate would move
forward, and the Administration could be supportive of that.
And one of the things we talked about in the last month in
the Committee is, when I discovered--maybe the rest of the
Committee--about the individuals in Phoenix were on 600 days of
paid leave. I thought we were going to fix that situation.
Their paid leave is over, but they are now working for the VA
again. And if we can't fix that situation, can you explain, Mr.
Secretary, of how folks that I think we all agreed would not be
working for the VA. You know, 600 paid days and at the end of
the day, are still working at the VA and other--
Secretary McDonald. Yes, sir. Well, you recall in the
testimony Sloane Gibson gave, Deputy Secretary, he said that we
were going to change our policy. That the policy of waiting for
the IG investigation to be over was taking us much too long. So
we are now doing our own investigations and bringing charges
much more quickly.
In the case of those individuals in Phoenix, we expect
within the next couple of weeks, you will be hearing something
about that. We are wrapping that up.
Mr. Huelskamp. And that--those were the folks that were on
paid leave. Are the other two folks that--are these the ones
that targeted the whistleblowers?
Secretary McDonald. There were two people in question who
were on administrative leave. We have brought them back to
work. In fact, immediately after that hearing, we brought them
back to work, and they are now working in the VISN
headquarters. And there is a third individual that was part of
the investigation who is currently working within the facility.
Mr. Huelskamp. Thank you, Mr. Chairman, I yield back.
The Chairman. Mr. Walz, you are recognized.
Mr. Walz. Thank you, Chairman. Mr. Secretary, thank you to
you and your team, for the work you do and we are just--I know
it is early here and we are still parsing through the budget,
but we all know budgets are more than just finances; it is a
moral document that reflects our values. And so when you bring
these issues to us, we are trying to find, and each of us is
pulling out, things that are important, are important to our
veterans. And I know that I do not want to over-simplify, but
that is exactly what I will do. But this issue keeps coming
back on, on opiate addiction and some of those, and it ties in
closely to the issue Mr. O'Rourke and Ms. Kuster talked about
that they are all interconnected on mental health piece on
suicides and things.
I think you heard, and I point this out, one of the root
causes of opiate and opiate addiction is pain as the systemic
cause. And I bring this up because you are hearing this--and I
am going to reflect a little frustration, that we are always
seeing someone as being reactive. Here, we were proactive.
Eight years ago, the best minds out in the private sector
dealing with pain management put together and passed, we did it
here, the VA Pain Management Care Act. And it was meant to be
the best practices step tiered, and it was all aimed at
treating the pain and reducing--because I think just showing
opiate numbers, sometimes people need that. And I think just
showing a reduction, I have got people calling my office who
there is nothing in between. They are off and on. So it is more
complex than that. And we put this thing into place, and a year
ago, I guess it was not quite a year, in June last year, Dr.
Clancy testified, it was never fully implemented. And it
expired and was not reauthorized. And I asked at that time to
get a full accounting of that because it was already three
months before that I had asked. I have never received an
answer. This was a bill that Congress passed proactively,
addressing what smart people outside of there and in here
crafted together to prevent this very thing we are seeing now.
And so I come--I know you are doing it. I know that was a
different world, that was not you, that was not your admin--I
point it out though, because I think at the risk of the
frustration of the American people, we want to fully fund what
you need to do this.
And this Congress passed and funded the Vet Pain Management
Act that people out there still believe is the best way to
reduce opium addiction. Never implemented, no answer why,
expired, business as usual.
Secretary McDonald. We'll get you that accounting back,
that reconciliation back. It is my sense, Congressman Walz,
that many of the things that were in that bill we are
implementing.
Mr. Walz. I think you are too. I believe that.
Secretary McDonald. But we owe you an accounting back as to
what we are doing and what we are not doing and why, but my
sense is--we are doing a lot of that.
Mr. Walz. I think that--
Secretary McDonald. These were all good best practices.
Mr. Walz [continued]. Yeah, I think so. And my guess is you
are exactly right. I think it is probably happening. But there
is a disconnect between that, the private sector pain
management experts, and this goes into device manufacturers
that are coming up with things to block this. I mean, you know
more about this, Dr. Shulkin, than I do. These folks come to me
and the disconnect back here to Congress and then I think some
of us who have been here, we are going to see well-meaning
members who come here, and they are going to tackle an issue
that we have already tackled once, or we have done it again,
and then that is that reinventing the wheel that, in a budget,
I do not want to see any of those resources not go to exactly
what you need them for. So I certainly do not want to say that
they were not being enacted.
Secretary McDonald. The only thing I would add to that is
in the different conferences I have spoke at, and the different
medical schools where I have spoken, there's a clear need of
the faculty to do a better job teaching pain management. There
just has not been enough training in medical school--
Mr. Walz. That is right.
Secretary McDonald [continued].--in pain management.
Mr. Walz. And private sector.
Secretary McDonald. We are trying to go upstream and get
some of these things dealt with strategically rather than just
the what happens now--
Mr. Walz. We treat addiction after it is there, good luck.
Secretary McDonald. Right.
Mr. Walz. We all know what that goes. We know recidivism
rates. We know everything else and all of the heartache and the
destruction of lives that go with it. That is why this was
implemented to track these people through from the very
beginning with a case manager on pain and that. And so if you
would take a look at that, I would appreciate it. I think we
would come back--and I know you're doing this, I know there is
experts in this, but I am hearing it from the outside that we
have really missed an opportunity to get on the front end. And
maybe I will segue into that implementation the Clay Hunt Act.
I know you talked about it at the conference, I know it is
real, I think Mr. O'Rourke is pointing out what is right. I
know in this case that the commitment from the VA is there to
get this on the forefront. I do think it is important to keep
mentioning that, that it is a priority. It is out there. We are
implementing. And we are going to see what happens with that. I
will leave with my last comment on this and this is just, I
guess, the Agent Orange Act expired. I am not convinced all the
research is in yet, but it is what it is. You still have the
ability on presumptions. Where does that fall into this because
we know what happens. When something is added on this, it all
ties together with case backlogs, Nemer (?) and everything
else, so--
Secretary McDonald. One of the things I have tried to do as
secretary in my twenty-some months so far is to look at a lot
of these things that have lingered for some period of time. The
Chairman was kind to mention the five-year-old lawsuit we had
in Los Angeles that was paralyzing our ability to do things on
our campus there--our 388-acre campus there. So I have taken a
look at a number of these things. C-123 Agent Orange,
reservists literally scraping out the residue of Agent Orange
from these airplanes. And I have put in place a more liberal
interpretation which gets those veterans the presumptive cares
that they need.
I have done the same thing with the presumptions around
Camp Lejeune, where we have included eight presumptions for
Marines at Camp Lejeune. I just took a look at Bluewater Navy,
I went back through the Institute of Medicine study. I also
went through the Australian study, and it was my point of view
that the science does not exist yet to do a presumptive for
Bluewater Navy.
Mr. Walz. My time is going to be up, Mr. Secretary, and I
want to thank you for all those that might--I guess, maybe do
you need the Act to further the science? See that is my fear,
that the Act--
Secretary McDonald. No, I do not think so. In fact, what we
did with the Bluewater Navy is, we didn't want to just say no,
so what we have done is we have formed groups there to go out
and do the research to discover whether or not we should create
presumptions for Bluewater Navy.
Mr. Walz. And I am grateful for that. I yield back. Thank
you, Mr. Chairman.
The Chairman. Thank you very much. Mr. Walz ate up one
minute of your time, Mr. Coffman. So you are recognized five
minutes.
Mr. Coffman. Thank you, Mr. Chairman. And Mr. Secretary,
thank you so much for stopping by my office yesterday to brief
me personally on the budget. Congressman Lamborn asked about
the IG report on Colorado Springs and asked the status of the
manager that was removed. And there was not an answer given to
that, so let me follow up with that. What is the status of the
manager that was removed?
Dr. Shulkin. Congressman, my understanding is, as the
Secretary had said earlier, that we have replaced the
supervisor who was responsible for the scheduling. That person
went to work in another part of the facility.
Mr. Coffman. What disciplinary action did they receive?
Dr. Shulkin. I am not aware that there was a specific
disciplinary action for that individual.
Mr. Coffman. Mr. Secretary, don't you think that is a
problem?
Secretary McDonald. Not the way I read the IG report,
Congressman. I think if you look at the IG report, the IG
report does not call out anyone for malfeasance. What it does
indicate is, number one, we didn't train the people properly.
Mr. Coffman. Who was responsible for that?
Secretary McDonald. Well, the leader is always responsible.
Mr. Coffman. Well, then why weren't they held accountable?
Secretary McDonald. Well, they are held accountable. They
are held accountable on their performance review, that doesn't
necessarily mean they get fired.
Mr. Coffman. Or disci--
Secretary McDonald. Firing doesn't lead to--
Mr. Coffman [continued]. Or disciplined.
Secretary McDonald [continued].--excellence in an
Mr. Coffman [continued]. Or disciplined.
Secretary McDonald [continued].--organization.
Well, discipline occurs on many different levels. I mean--
Mr. Coffman. Well, I would like to know specifically what
discipline is.
Secretary McDonald. Well, we will get back to you. We will
get back to you on how it was handled.
Mr. Coffman. Thank you. When you mentioned Title 38 on the
SES, what percent of the workforce would that apply to?
Secretary McDonald. Well, SES is about 540 or so
individuals of a total of about 360,000.
Mr. Coffman. So what about--
Secretary McDonald. They are the senior leaders of the
organization.
Mr. Coffman. And what reforms are you putting forward, best
professional judgment, given the fact that you came from the
private sector, what personnel reforms are you putting in for
the others, for the rank and file?
Secretary McDonald. Yeah. Right now, as I told you, we are
training the organization in mission and values and leadership.
We have taken over 12,000 people and trained them. These
training sessions are cascading throughout the organization.
Mr. Coffman. So there are no reforms in terms of--
Secretary McDonald. I have not had--
Mr. Coffman [continued].--making it easier to let poor
performers go? You are not putting any reforms in that
direction?
Secretary McDonald. We have let 2,600 people go.
Mr. Coffman. Okay. We had, I think it was, House Resolution
280, that came before the Congress. And we had testimony from
your staff that you were neutral on that. Let me explain what
that does. One of the biggest scandals the VA has had is on the
appointment wait times. And I think that that corruption was
fed through bonus money, was fueled through bonus money to
bring those down. And yet, we have had legislation before us
that your office is neutral on, that says that you ought to
have the ability to claw back bonuses when they are
fraudulently given. The only way that you can currently claw
back bonuses under existing law is if it is administratively
given to the wrong person, and for no other reason. Why would
you be neutral on such a simple reform like that?
Secretary McDonald. Well, bonus spending across the VA is
down, and down dramatically. In 2015--
Mr. Coffman. That's not the--
Secretary McDonald [continued].--total VA spending for all
the work categories--
Mr. Coffman. Sure. But why would you--somebody who
fraudulently received a bonus, why would you not demand that
the taxpayers and the veterans get that back?
Secretary McDonald. A reduction of $19 million, it was 7
percent below the previous year. And here's a graph that shows
you the reduction in bonus spending. And as I have laid out for
the Chairman a couple of times, we are--
Mr. Coffman. So you are okay. Let me get this straight. You
are okay with somebody who has got a bonus, even though it has
been proven that they should have never got that bonus because
their conduct, that was fraudulent in receiving that bonus,
like under the appointment wait times. So what you are saying
by not supporting that legislation is you are okay with that.
Secretary McDonald. I'm working on the future, not the
past.
Mr. Coffman. Well, you are, how?
Secretary McDonald. The future is about making sure people
are given performance awards that measure what they do, and
that is why we are bringing the bonus totals down for the
department. And that is why we are putting the--we are
relatively rating people consistent with the best practices in
the private sector.
Mr. Coffman. We had Glenn Haggstrom who--a billion dollars
over budget in the Aurora VA Hospital, retired just right
before he was supposed to be interviewed by the IAB. We just
had Dr. Schinazi retire just before--just after the story broke
about the hep C problem where he was a researcher with VA,
helped develop the drug there. And then took that intellectual
property, created a private entity, where VA did business with
that private entity. And he retired. I mean, what is going on?
Here is the problem, that you are saying great things here, but
you are not attacking the heart of the problem, and the heart
of the problem is--we have a horrible personnel system that
allows this bureaucrat incompetence, that allows this
corruption to continue. Where are you on this?
Secretary McDonald. Congressman Coffman, as I said earlier,
I think if we can work on the reclassifying the SES, this Title
38, that would be a big step forward. And, you know, as we have
said previously, you can't fire your way to excellence. And it
is my experience that we are taking--
Mr. Coffman. Well, that would be a good start.
Secretary McDonald [continued].--the right steps, we are
taking the right steps--
Mr. Coffman. It might be a good start.
Mr. McDonald [continued]--to create a high performance
organization.
Mr. Coffman. I think firing incompetent people would be a
good start.
Secretary McDonald. And by the way, I don't think I have
the authority to claw back somebody's bonus after they retire.
If you want that, you will have to change the law. I don't
write the laws.
Mr. Coffman. Could port (?) the law and we have
legislation--
Secretary McDonald. I don't write the laws.
The Chairman. Thank you very much. And also to bring all
the members up to speed, we are working with the four corners
on trying to pre-conference and negotiate a lot of these
issues. Both sides are working collectively. The language that
you referred to has passed the House. We are trying to get our
Senate colleagues to follow us so that we can in fact change
the law, so that for those who have broken the law in
particular and have been convicted, to give you the ability, or
your successor, to go in and claw that bonus back. I think that
is an important tool that we should focus on. You don't have
that ability now. We found that out after Pittsburgh. I think--
was the Legionnaire's issue there. Mr. McNerney?
Mr. McNerney. I thank the Chairman, and I thank you, Mr.
Secretary and your staff for your hard work on developing this
budget. I have some probe go (?) questions, if you don't mind.
The Palo Alto VA is in my--it is not in my district, but a lot
of my veterans use that. And they provide excellent service, no
doubt about it. But it is in a very high-priced area. It is
very expensive to live in Palo Alto. And the commute there is
murder. Do you have any way to compensate for high cost areas
for your employees? Because they are going to be, you know,
priced out of that office.
Secretary McDonald. We do have some flexibility, sir, for
location premiums. I would argue it is not enough. And if we
can do what we talked about with Title 38 that would give us
more flexibility. The Palo Alto facility is one of our very
best. Many of the doctors there also teach at Stanford Medical
School, and we do a lot of research there. It is really an
outstanding facility. It is probably one of our best Lean Six
Sigma facilities in the country.
Mr. McNerney. I agree. Moving on. The VA has a construction
backlog that can last years. Of course, we have experienced
that in my district on the French Camp facility. Are you in
support of public-private partnerships or partnerships with
local governments where the state, for example, can pay part of
the construction fees and partner with the VA or the Corps of
Engineers?
Secretary McDonald. We have done that in the past and that
is one of the reasons we are looking for the extended use
leasing on the Los Angeles campus.
Mr. McNerney. Have you found that to be a successful model?
Secretary McDonald. Yes, in fact at Menlo Park, which is
very close to the Palo Alto campus, we have an extended use
lease going with a company called CoreRVA who built a building
for aged veterans, aging veterans, and we are leasing that
building back from them, or renting that building back from
them.
Mr. McNerney. The last question has to do with the way
veterans use VA benefits. Do you track demographic data like
gender or ethnic group or economic class, in terms of how the
benefits are distributed?
Mr. Pummill. We have pretty extensive data, location,
whether or not they are married, the age of the veteran. I'm
not sure if we track economic, but everything else we pretty
much have.
Mr. McNerney. Could that be made available to my office,
that information?
Mr. Pummill. Sure. We actually put out a book every year by
state with all that data. We can make sure you get a copy.
Mr. McNerney. Okay. I mean, the plan that you put forth is
ambitious. It is good. The VA needs to modernize, and I think
everyone on the Committee here is behind this effort. There is
going to be some disagreements, but my hat is off to your
efforts and we are going to try and support you the best we
can. Mr. Chairman.
The Chairman. Ms. Walorski, you are recognized.
Ms. Walorski. Thank you, Mr. Chairman, and thank you, Mr.
Secretary, for being here today and bringing your team. And I
just wanted to say how thrilled I am to hear that you have made
the transition to the concept of running on principle and not
just necessarily on the bureaucratic rules in the VA because
there are so many. I look forward to that as it kind of winds
out in my district.
Ms. Council, not to leave you out, I have been interested
in this issue with IT since I have been here in Congress. And I
am just curious, you are asking for--the VA is requesting $4.2
billion for cutting-edge information technology. I have heard
that probably three times since I've been here, the additional
billions of dollars that have to go into this new cutting-edge
technology. My first question is just quickly how much of that
money is going to be kept for just maintaining the legacy
systems we have, and then, how much of that is actually being
carved out for new cutting-edge technology?
Ms. Council. I don't have the breakdown, but I will get
that to you. What I will tell you is we have a large legacy
issue that we need to address. We are increasing our spend on
security to $370 million, fully funding and fully resourcing
our security capability. In addition, we are putting in well
over $50 million in creating a data management backbone that we
didn't have and we have added five new functions within the
organization that will modernize the IT organization.
Ms. Walorski. Let me ask you this just quickly. So is this
money you're requesting, this $4.28 billion, is this going to
take care then of the maintenance of the legacy system and
achieve the goals that you are talking about right now, or are
we going to be looking next year at another 5 billion, another
6 billion? Is this take care of and suffice to get the VA where
you need to per the goals that you just talked about?
Ms. Council. Yes, it does.
Ms. Walorski. Okay. I appreciate that.
And, Secretary McDonald, I just wanted to again bring you
up to speed with what is happening in the state of Indiana, and
I am again asking that you come and visit our northern Indiana
VISN.
You know, two of the things that continued to be an issue,
and for as fast as you are working to reform these things, and
for the footsteps that we are taking forward on reform, and we
are, and I appreciate that. You know, we still deal with an
issue in our district, it is probably not unlike anybody else
in this country, but it really makes a difference in our
district, is that all of our top-level VISN executives have
been promoted around the country and now we are just not
dealing with doctor shortages and nursing shortages, now we are
dealing with administrative shortages. So when a veteran
exhausts all, you know, appeals and those processes, they come
to the Congressional office and they say will you help? And
they are at the end of their end. And now, as we have to get
involved, and now with Congressional inquiries and battling for
the sake of our veterans and trying to bring those mountains
down, we are going through temporary people that really aren't
really accountable to anybody, and it really provides zero
transparency then as we tried to come and in good faith with
the VA, try to figure out where some of these mishaps are.
And I just want to give you the one example, because I am
going to need your help on this situation, is, I have got a
veteran that was in the appeals process for years, and it has
been back and forth, where the VA will say no, they will deny
him, and then they will come back and they will prove some
point, and they will say yes, they will say no, and they will
say yes. This guy, in bad, bad health, with serious heart
complications and surgeries, is left holding a bag that now the
VA says yes, we're going to pay the bill. And the hospitals are
coming back to him with interest. Over the last four years, I
have got a veteran right now responsible for $10,000 of
interest and this was never his fault. But I look at part of
that of saying can you help us mitigate that with the VA,
number one. Number two, how long can we possibly and can the VA
possibly run with temporary administrators?
Secretary McDonald. If you could, Congresswoman, please get
me his name.
Ms. Walorski. I will.
Secretary McDonald. And I will work on that. We have the
ability to give relief on that--if we made a mistake--to give
relief, financial relief on that interest that he would be
charged. So on all these things, if a veteran comes to you,
give him my phone number, give him my email address, you don't
need to deal with it, we will. And we will get it effectively
resolved.
The issue you mention on vacancies is one of the biggest
issues we face, if not the biggest issue we face. It is ironic
that when I talk to our organization, I do that a lot, because
whenever I go anywhere I do town hall meeting, they tell me
that people don't want to join VA because it is a maligned
organization and everybody is being fired. And then I come and
sit in front of you and you tell me nobody is being fired. And
the truth, of course, is somewhere in the middle.
And our applications are down over 75 percent for available
positions, and that's just unacceptable. It is a great place to
work, and I have encouraged each and every one of you, and the
Chairman has done it, and the Ranking Member, to go recruiting
with me. And let's stand together and recruit the future
leaders of this organization.
Ms. Walorski. Just curious, does this budget reflect any
kind of new recruitment efforts or the tools that you need to
do that?
Secretary McDonald. Absolutely.
Ms. Walorski. Okay. I appreciate that. And I yield back,
Mr. Chairman, thank you.
The Chairman. Dr. Abraham, you're recognized.
Mr. Abraham. Thank you, Mr. Chairman and thank the Members
for being here. Mr. Walz brought up something I think that is
so important and that is the moral duty and the ethical duty
that we as a Committee and you as the VA have for our veterans
to ensure that the money that we give you is spent in the best
fashion so that as many veterans as possible can get the best
care. And I know you agree with that statement.
Certainly, it goes also to the trust issue. As a physician,
I will write a prescription, I give a diagnosis, that patient
trusts me. If I make the wrong decision, that patient could
very easily die. And in your arena too, the decisions that you
all make certainly deal with life and death on almost a daily
basis such as any physician. And it brings me to the question I
am going to ask you, Mr. Secretary, let's go back to this IG
report that we keep going back and forth here.
Last month the IG testified that due to data manipulation,
that the VA's backlog statistics were not reliable. And my
question is how can we trust the Department's current figures
when it comes to the request to fund 300 additional non-rating
claims processors, 900 additional board of appeal staff, so
where is that trust that we as a Committee and the veterans--
how can you ensure that?
Secretary McDonald. Our data and our data integrity is
absolutely critical to our success as it is to any business. So
obviously, it is something we are working very hard on. I did
not read that IG report as conclusively as you did, that--
because it sounded from what you said as if all of our data was
not good.
Mr. Abraham. I am just ponying on what the IG said.
Mr. Pummill. Can I just chime in a little bit on this
because, Congressman, I have read the report. I absolutely
disagree with the IG's statement that the--
Mr. Abraham. Well, let me interrupt. I mean, he is an
expert in his field.
Mr. Pummill. I don't believe he is or he wouldn't have said
that.
Mr. Abraham. Well, then there--
Mr. Pummill. If you look at the statistics.
Mr. Abraham [continued].--is a big divide there then I
would argue that if we have got an inspector general of the
VA's department saying one thing, you guys saying something
else, where is the trust that that veteran--where is he going
to find who to trust?
Mr. Pummill. The bottom line, Congressman, is last year we
paid out more money to more veterans faster than we ever have
in the history of the VA. All those stats are there, all that
data is there. 1.4 million veterans, over $90 billion in
benefits and services. I mean huge numbers out there, and we
are doing more and more and more and we are doing it faster and
faster to veterans, so I disagree with your assessment.
Mr. Abraham. You are reading the same report I am sure I
am, the transcript of the IG report.
Mr. Pummill. Yes, I am. Absolutely.
Secretary McDonald. Believe me, sir, we read the reports.
We read the reports.
Mr. Abraham. I just have.
Secretary McDonald. As you know, we don't have an IG right
now.
Mr. Abraham. I understand that.
Secretary McDonald. And we have nominated, the President
has nominated, a very talented individual that we are trying to
get confirmed by the Senate. And I think what you will see is
the quality of our work will go up.
Mr. Abraham. You know, as a guy that deals in the
objective, I just have a hard time understanding how there can
just be spaces of worlds apart between your opinion and the
IG's when you have data that is just in black and white. And we
will continue to debate.
I want to get another question. Let me get another question
in, Mr. Secretary. The Department's budget proposals put forth
is about the simplified appeals process that would consist of
closing records on appeals and eliminating what are termed
optional hearings. And I guess what I'm asking, please provide
details about the proposal including how it will strike--and it
is a delicate balance, I realize, of achieving timely,
accurate, and fair appeal decisions for veterans and their
families.
Secretary McDonald. As we said, Congressman, the proposal
we put forward is a strawman. If you have better ideas, we
would love to hear them.
Mr. Abraham. We will get--
Secretary McDonald. And as veterans service organizations
have better ideas, we would love to hear them.
Mr. Abraham. Okay.
Secretary McDonald. What we all know is today is untenable,
it is unacceptable.
Mr. Abraham. I agree and I will certainly.
Secretary McDonald. And what we are committing to with this
proposal is, as we said, in the future 90 percent of appeals
done in one year. So let's work together, let's get this done.
And we are open to any idea, just like Congressman O'Rourke
gave us an idea last week and we changed.
Mr. Abraham. Just real quick, that 440,000 that are in the
cycle now, is there just a guesstimate or an educated
guesstimate, how many of those are within the two or three year
processed appeal?
Secretary McDonald. I will have to get back to you, sir.
Mr. Abraham. That is all right. Fair enough.
Secretary McDonald. I don't know the answer to that.
Mr. Abraham. Fair enough. Thank you, Mr. Chairman.
Secretary McDonald. Given that two percent of the people
create roughly half the appeals, I would assume that there's
quite a few that this is their, you know, multiple, multiple
appeal.
Mr. Abraham. So maybe past the three year.
Secretary McDonald. Yeah.
Mr. Abraham. Okay. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you very much. Mr. Takano, do you have
a closing question please?
Mr. Takano. Mr. Secretary, I really want to get an answer
on your planning for more graduate school education, more GMEs.
And is your resourcing that you are asking for, is it adequate
for what we need in the future? I mean, we did insert 1500 more
GMEs in the Choice Act, but the medical associations were all
telling us they need more. And I am of the mind that this is
perhaps the best area, the best Committee, to be able to try to
make some headway into the overall doctor supply. And what you
are doing to consolidate care in the community, I think, might
enable us to have this be a platform.
Dr. Shulkin. Congressman, first of all, thank you to the
Congress for giving us the 1500 slots. The country needs them.
We need more graduate medical education slots. And VA can
really help in this. But of the 1500 slots, we have only used
372 today. And what we have learned is, is that we actually
can't do everything that VA needs to do because we need the
hospitals--we work with affiliate hospitals--they don't have
the infrastructure and they don't have the ability to pay for
these. So we would like to work with you and members of the
doctors caucus, or anybody else who would like to, to give us
the flexibility to help actually expand these medical education
programs further. We would like to focus in primary care and
mental health and in rural areas, absolutely. But we do need
some additional flexibility to actually carry out the intent of
Congress here.
Mr. Takano. Well, I hope that--I mean, I appreciate your
working with Dr. Roe in the doctors caucus, but there are other
of us who, Ms. Titus, myself, and Mr. O'Rourke actually were
coauthors of that language that got into the Choice Act. We
would be happy to work with you on that. I mean, the primary
care doctors in mental health are exactly what a lot of regions
need, rural regions, and suburban urbanized regions such as
mine, we are under-doctored. And so we definitely want to work
with you on these issues.
Dr. Shulkin. Okay. Thank you.
Mr. Takano. Thank you.
The Chairman. Real quickly, Mr. Secretary, we talked about
where the budget expands and spends more money, invests more in
veteran programs, could you give us two or three examples of
where this budget goes in and actually cuts some wasteful
spending and programs? Not efficiencies, I'm talking about
eliminates from the program.
Secretary McDonald. Go ahead.
Dr. Shulkin. Two areas where we have significant decreases
as you know are in construction. We have actually taken our
budget down significantly until we get the commission on care
findings.
The Chairman. That doesn't count. Try again.
Dr. Shulkin. No? Okay. How about this one then? We have
actually reduced our funding for our EMR this year until we,
Ms. Council and I, and the Secretary and others, get a clear
plan on where we want to go with our electronic medical
records.
The Chairman. No, my question was wasteful spending. And I
don't think you would say the electronic medical record is
wasteful spending. We are talking about a, now, $180 billion
budget. Is there anything that was eliminated this year?
Secretary McDonald. Well we'd like to close those, you
know, 10 million square feet of unused space. We have more
space being created because we are saving about 5,000 tons of
paper a year in VBA.
The other thing I will tell you is--we are only at the
beginning of this. As part of our training program, this
Leaders Developing Leaders, we have put in place a process
called RAMP, which stands for Reports, Meetings, Priorities,
and so forth, where groups of people get together and actually
stop work that they are doing. We haven't put dollar amounts
against all of that yet. We are cataloguing all the things we
are stopping doing. And then, we will put dollar amounts
against it, and we will come back to you and tell you what
those dollar amounts are.
Remember in this budget too, one of the things we are
proposing, if you will help us, is the creation of a unified
holistic supply chain for VHA. There is a lot of money sitting
on the table. We are committing here to saving at least $150
million, if you can help us do that. Right now, each one of our
facilities has its own supply chain. We know by consolidating
those supply chains, we can save a lot of money.
The Chairman. And I appreciate that, and I do think you
need to be looking for efficiencies, and I know that is
something that you are focused on.
Secretary McDonald. It is in our written testimony, if
you--
The Chairman. But surely somewhere in a $170 billion
budget, there is waste that could be eliminated. If you would
have some folks go out searching. We need to go ahead and
adjourn now, but if you would, for the record, we will take
that in.
Obviously, we are all trying to absorb as much of the
budget as we can. So as we look through it, there will be more
questions that this Committee will have. And I would, as our
custom, say that all Members who have five legislative days
with which to revise and extend or add extraneous materials to
their remarks
Without objection, so ordered. And with that, this hearing
is adjourned.

[Whereupon, at 12:00 p.m., the Committee was adjourned.]

A P P E N D I X

----------

Prepared Statement of Corrine Brown
Thank you, Mr. Chairman.
Mr. Secretary, I want to thank you, and thank the
President. During the President's tenure, discretionary spending has
increased 86%. The President is doing his part to take care of
veterans. I believe that this budget provides us with a starting point
to begin the process of making sure veterans are getting the benefits
and services we have promised them.
I look forward to discussing your proposal to establish
an additional appropriations account focused on community care,
especially in light of your repeated requests for ``budget
flexibility.''
I want to be assured that this account will not take our
focus away from providing the VA with the resources it needs to provide
health care to our veterans.
In light of the shortfalls VA faced last year, and the
uncertainty of reform efforts, I want to ask you, Mr. Secretary, the
question I ask every year - does this budget give you what you need to
accomplish your mission?
Do you believe that there are areas that need a special
focus and may need additional dollars?
I stand ready to do whatever I can to make sure you have
what you need. But while I will be in the front line of fighting for
the dollars you need, I want to be very clear - I expect you to spend
every dollar we give you wisely for our veterans.
I believe we must focus on our veterans. By focusing on
our veterans we will begin the process of rethinking how we ensure that
we keep our promises to them in the years ahead.
So let us know what you need, and we will, working
together, on both sides of the aisle, make sure you have the tools and
the dollars to accomplish your mission.
I yield back the balance of my time.

Prepared Statement of Robert A McDonald
Good morning, Chairman Miller, Ranking Member Brown, and
Distinguished Members of the House Veterans' Affairs Committee. Thank
you for the opportunity to present the President's 2017 Budget and 2018
Advance Appropriations (AA) requests for the Department of Veterans
Affairs (VA). This budget continues the President's faithful support of
Veterans and their families and survivors, and it sustains VA's
historic transformation. It will provide the funding needed to enhance
services to Veterans in the short term, while strengthening the
transformation of VA that will better serve Veterans in the future.

A Vision for the Future

VA's vision for the future is to be the No. 1 customer-service
agency in the Federal government. The American Customer Satisfaction
Index already rates our National Cemetery Administration No. 1 with
respect to customer service. In addition, for the sixth year in a row,
VA's Consolidated Mail Outpatient Pharmacy received J.D. Power's
highest customer satisfaction score among the Nation's public and
private mail-order pharmacies. These are compelling examples of
excellence. We aim to make that so for all of VA.
We are transforming the entire Department, not just making
incremental changes to parts of it. We began in July 2014 by
immediately reinforcing the importance of our inspiring mission-caring
for those ``who shall have borne the battle,'' their families, and
their survivors. Then, we re-emphasized our commitment to our
exceptional I-CARE Values-Integrity, Commitment, Advocacy, Respect, and
Excellence. To provide timely quality care and benefits for Veterans,
everything we are doing is built, and must be built, on the rock-solid
foundation of mission and values.
MyVA is the catalyst making VA a world-class service provider. It
is a framework for modernizing VA's culture, processes, and
capabilities so we put the needs, expectations, and interests of
Veterans and their families first, and put Veterans in control of how,
when, and where they wish to be served.
Listening to others' perspectives and insights has been, and
remains, instrumental in shaping our transformation. We have taken
advantage of an unprecedented level of outreach to the field and our
stakeholders. In my first months as Secretary, I assessed VA and
recognized that we would need to change fundamental aspects of every
part of VA in order to rise to excellence. I shared my assessment's
results with President Obama and received his guidance. I discussed my
findings with you and other Members of Congress-privately and during
hearings. And I consulted with literally thousands of Veterans, VA
clinicians, VA employees, and Veteran Service Organizations (VSOs) and
other stakeholders in dozens of meetings.
Since my July 29, 2014, confirmation, I have made 277 visits to VA
field sites in more than 100 cities, including 47 visits to VA Medical
Centers, 30 visits to homeless Veterans program sites, 16 visits to
Community Based Outpatient Clinics, 15 Regional Offices, and 9
Cemeteries. I have attended 61 Veteran engagements through public and
private partnerships and 60 stakeholder events to hear firsthand the
problems and concerns impacting our Veterans. To recruit individuals to
work for VA as medical professionals and in other critical fields, I
have visited 50 medical schools, universities, and other educational
institutions. This kind of outreach, partnership, and collaboration
underpins our department-wide transformation to change VA's culture and
make the Veteran the center of everything we do.

Progress

Transforming an organization of this size is an enormous
undertaking. It will not happen overnight. But we are now running the
government's second largest Department like a $166 billion Fortune 6
organization should be run. That is, balancing near term performance
improvements while rebuilding VA's long-term organizational health.
Effective change often requires new leadership, and we have made
broad changes. Of our top 16 executives, 10 are new to their positions
since I became Secretary. Our team today includes extensive executive
expertise from the private sector: a former banking industry Chief
Financial Officer and President of the USO; the former Chief Executive
Officer of Beth Israel Medical Center in New York City and Morristown
Medical Center in New Jersey; a former Chief Executive of Jollibee
Foods and President of McDonald's Europe; a former Chief Information
Officer of Johnson & Johnson and Dell Inc.; a former partner in
McKinsey & Company's Transformational Change and Operations
Transformation Practices; a retired partner in Accenture's Federal
Services Practice; a former Chief Customer Officer for the City of
Philadelphia who previously spent 10 years at United Services
Association of America (USAA), one of the best and foremost customer-
service organizations in the country; a former entrepreneur and CEO of
multiple technology companies; and a retired Disney executive who spent
2010-2011 at Walter Reed National Military Medical Center enhancing the
patient experience.
Most members of the executive leadership team are Veterans
themselves. They have served from Vietnam to Iraq and Afghanistan, and
each is here because he or she demonstrates a personal commitment to
our mission. These fresh, diverse perspectives, combined with our more
experienced government and health care executives, will continue to
catalyze innovation and change.
Thanks to the continuing support of Congress, VSOs, union leaders,
our dedicated employees, states, and private industry partners, we have
made tremendous headway over the past 18 months. In 2015, we made
notable progress building the momentum that will begin delivering
transformational changes that VA needs.
Congress has passed key legislation-such as the Veterans Access,
Choice, and Accountability Act and the Clay Hunt Suicide Prevention for
American Veterans Act-that gives VA more flexibility to improve our
culture and ability to execute effectively.
Consistent with the culture of a High Performance Organization that
serves Veterans and their families, we have turned VA's structural
pyramid upside down. Veterans and their families are at the top. The
Office of the Secretary is at the bottom, supporting subordinate
leaders and the workforce who are serving Veterans. This method of
thinking and operating is a reminder to all employees and stakeholders
that we are here to support our Veterans, not our bosses.

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While reinforcing our I-CARE Values, we are transitioning from a
rules-based culture that may neglect the human dimension of service to
a principles-based culture grounded in values, sound judgment, and the
courage and opportunity ``to choose the harder right instead of the
easier wrong . . . .''
We formed a MyVA Advisory Committee (MVAC) to advise us on our
transformation. The MVAC is comprised of a diverse group of business
leaders, medical professionals, experienced government executives, and
Veteran advocates. The Chairman is retired Major General Joe Robles,
former Chairman and CEO of USAA. The Vice Chairman is Dr. J. Michael
Haynie, Air Force Veteran, Vice Chancellor of Syracuse University and
founder of the Institute for Veteran and Military Families (IVMF). The
MVAC includes executives with deep customer service and transformation
expertise from organizations such as Amazon, The Cleveland Clinic,
McKinsey & Company, Johns Hopkins, Mayo Clinic, as well as a former
Surgeon General, a former White House doctor for three 3 US Presidents,
a university president who was a Rhodes Scholar from the Air Force
Academy who currently serves as a reserve Air Force Lieutenant Colonel,
and advocates for both the traditional VSOs and post-9/11 Veterans'
organizations.
Private sector leadership experts are bringing cutting-edge
business skills and developing VA teams in new ways. We are training
critical pockets of our workforce on advanced techniques like Lean and
Human Centered Design. For example, working with the University of
Michigan, we have already trained more than 5,000 senior leaders across
the Nation in our ``Leaders Developing Leaders.'' The Veterans Benefits
Administration (VBA), Veterans Health Administration (VHA), and our
Veterans Experience team collaborated using Human Centered Design and
Lean techniques to redesign the Compensation and Pension Examination
(C&P Exam) process because we received consistent feedback that the
process-often, a Veteran's first impression of the VA when separating
from service-can be a confusing and uncomfortable experience.
Across VA, we are encouraging different perspectives and listening
to all of our key stakeholders, even those who are critical of VA. To
benchmark and capture ideas and best practices along our transformation
journey, we have been working collaboratively with world-class
institutions like Procter & Gamble, USAA, Cleveland Clinic, Wegmans,
Starbucks, Disney, Marriott and Ritz-Carlton, NASA, Kaiser Permanente,
Hospital Corporation of America, Virginia Mason, DoD, and GSA, among
others.

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VA named the Department's first Chief Veteran Experience Officer
and began staffing the office that will work with the field to
establish customer service standards, spread best practices, and train
our employees on advanced business skills.
Rather than asking Veterans to navigate our complicated internal
structure, we are redesigning functions and processes to fit Veteran
needs in the spirit of General Omar Bradley's 1947 proposition that
``We are dealing with Veterans, not procedures; with their problems,
not ours.''
We are realigning VA to facilitate internal coordination and
collaboration among business lines-from nine disjointed, disparate
organizational boundaries and organizational structures to a single
framework. That means down-sizing from 21 service networks to 18 that
are aligned in five districts and defined by state boundaries, except
in California. This realignment means opportunities for local level
integration, and it promotes consistently effective customer service.
Veterans from Florida to California, Puerto Rico to Maine, Alaska and
Guam, and all parts in between, will see one VA.
We have developed a multi-year plan for creating a world-class
Information Technology organization, and on November 11, Veterans Day,
we launched the Vets.gov initial capability. Developed with support
from the U.S. Digital Services Team and informed by extensive feedback
from Veterans, Vets.gov is a modern, mobile-first, cloud-based Web site
that will replace numerous other Web sites and Web site logins with a
single, easy to navigate location. The Web site puts Veteran needs and
wishes first, and we will continue to add the capability that's
required to improve its accessibility and usefulness. As Vets.gov
evolves, it will simplify the Veteran experience by re-using and making
consistent Veteran information, including mailing address and phone
number, across the agency.
At VA, we know that serving Veterans is a collaborative exercise,
so we will not function in a vacuum. We are operating as part of a
community of care, forming strategic partnerships with external
organizations to leverage the goodwill, resources, and expertise of
valuable partners to better serve our Nation's Veterans and help
address a wide variety of Veteran needs, including employment,
homelessness, wellness, and mental health. Partners include respected
organizations like the YMCA, the Elks, the PenFed Foundation, LinkedIn,
Coursera, Google, Walgreens, academic institutions, other Federal
agencies, and many more. These partnerships reflect our commitment to
re-thinking how VA does business so we can leverage the strengths of
others who also care for Veterans.
We have enabled 36 Community Veterans Engagement Boards, a national
network designed to leverage all community assets, not just VA assets,
to meet local Veteran needs. Fifteen more communities are in
development right now.

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We have renewed and redefined working relationships with our union
partners, and union leaders are part of the team, and have had
significant input into MyVA. We continue to work with them to address
issues and make sure our employees are involved often and early in
every major decision.
We are continuing to develop a robust provider network while we
streamline business processes and re-imagine how we obtain services
such as billing, reimbursement credentialing, and information sharing.
We continue to listen, learn, and grow.

VA's Agency Priority Goals

In 2015, we were guided by and made notable progress toward
reaching our three Agency Priority Goals (APGs)-(1) Improve Veteran
Access to VA Benefits and Services, (2) End Veteran Homelessness, and
(3) Eliminate the Disability Backlog. These accomplishments toward
achieving our APGs demonstrate VA's commitment to using our resources
effectively to improve care and benefits for Veterans.

Access

We expanded capacity by focusing on staffing, space, productivity,
and VA Community Care.
Access. Since discovering the access challenges in Phoenix,
Arizona, we have aggressively improved access to care, not just in
Phoenix but across VA as a whole. For instance, in the first 12 months
after discovering the Phoenix appointment backup, from June 2014 to
June 2015, we completed 7 million more appointments than during the
same period the year prior: 2.5 million of those appointments were at
VA; 4.5 million appointments were in the community. Altogether in FY
2015, we completed 56.7 million appointments, nearly 2 million more
than FY 2014. More than 97 percent (55 million) of those 56.7 million
appointments were completed within 30 days of the clinically indicated
or Veteran's preferred date, an increase of 1.4 million over FY 2014
numbers.
Veteran access is one of the five critical priorities supporting VA
health care transformation with far-reaching impact across VA that
Under Secretary for Health, Dr. David J. Shulkin announced in September
2015. With the Access Stand Downs, VHA is empowering each facility to
focus on the needs of its specific population and refocusing people,
tools, and systems on a journey of continuous improvement towards same-
day access for primary care and urgent specialty care. The immediate
goal is that no patients with urgent appointment requests in VA clinics
with the most critical clinical needs, such as cardiology, urology, and
mental health, are waiting more than 30 days.
From November 9, through November 13, 2015, VHA conducted a
complete review of all Veterans waiting for appointments-with a focus
on those Veterans waiting for clinically important and acute services-
to ensure that the wait was clinically appropriate as determined by the
Veteran's treatment team. This process culminated with the VHA's first
Access Stand Down on November 14th-a nationwide effort to ensure
Veterans get the right care at the right time.
In the first Access Stand Down, VHA reviewed nearly 55,800 of the
more than 56,000 Level One, stat, consults that were open more than 30
days (as of November 6, 2015), a herculean effort. Of those 55,800
urgent open consults reviewed, 82 percent (45,849) were scheduled or
closed by the end of that first Stand Down.
Building on the November 14th Access Stand Down momentum and
success, VHA is continuing to maximize accessibility to outpatient
services with the coming February 27th, 2016 Access Stand Down. The
February Stand Down is an opportunity to make another significant leap
in dramatically enhancing Veterans' access to care. Clinical operations
will meet customer demand through resource-neutral, continuous
improvement at the facility-level and scaling-up excellence across the
enterprise.
VetLink data is another way we are listening to Veterans. Since
September 2015, VHA has analyzed preliminary data from VetLink, our
kiosk-based software that allows us to collect real-time customer
satisfaction information. In all three separate VetLink surveys to
date-related to nearly half-a-million [476,672] appointments-Veterans
told us that about 90 percent of the time, they are either ``completely
satisfied'' or ``satisfied'' with getting the appointment when they
wanted it. However, about 3 percent of Veterans who participated in the
survey were either ``dissatisfied'' or ``completely dissatisfied,'' so
we have more work to do.
Staffing. We increased net VHA staffing. VHA hired 41,113
employees, for a net increase of 13,940 health care staff, a 4.7
percent increase overall. That increase included 1,337 physicians and
3,612 nurses, and we filled several critical leadership positions,
including the Under Secretary of Health.
Space. We activated 2.2 million square feet in FY 2015, adding to
more than 1.7 million square feet of clinical space activated in FY
2014.
Productivity. We increased physician work Relative Value Units
(RVUs) by 9 percent. VA completed more than 1.4 million extended hour
completed encounters in primary care, mental health and specialty care
in FY 2014 and more than 1.5 million in FY 2015, an increase of 5.7
percent in extended hour encounters.

Care in the Community

In 2015, VA obligated $10.5 billion for Care in the Community,
including resources provided through the Veterans Choice Act-an
increase of $2.3 billion (28 percent) over the 2014 level-which
resulted in nearly 2.4 million authorizations for Veterans to receive
Care in the Community from December 3, 2014 through December 2, 2015.
Programmatically, this included care in the community for Veterans'
dialysis, state home programs, community nursing care, Veterans home
programs, emergency care, private medical facilities care, and care
delivered at Indian health clinics. It also includes care under VA's
CHAMPVA program for certain dependents who were entitled for that care.

Homelessness

Veteran homelessness has continued to decline, thanks in large part
to unprecedented partnerships and vital networks of collaborative
relationships across the Federal government, across state and local
government, and with both non-profit and for-profit organizations.
Ending and preventing Veteran homelessness is now becoming a reality in
many communities, including: the Commonwealth of Virginia; New Orleans,
Louisiana, Houston, Texas; Las Vegas, Nevada; Philadelphia,
Pennsylvania; Syracuse, New York; Winston-Salem, North Carolina; and
Las Cruces, New Mexico. In collaboration with our Federal and local
partners, we have greatly increased access to permanent housing; a full
range of health care including primary care, specialty care, and mental
health care; employment; and benefits for homeless and at-risk for
homeless Veterans and their families.
In FY 2015 alone, VA provided services to more than 365,000
homeless or at-risk Veterans in VHA's homeless programs. Nearly 65,000
Veterans obtained permanent housing through VHA Homeless Programs
interventions, and more than 36,000 Veterans and their family members,
including 6,555 children, were prevented from becoming homeless.
Directly related is Veteran unemployment, which dropped to its
lowest point since April 2008, according to the Bureau of Labor
Statistics' October 2015 report.
Overall Veteran homelessness dropped by 36 percent between 2010 and
2015, based on data collected during the annual Point-in-Time (PIT)
Count conducted on a single night in January 2015. We saw a nearly 50
percent drop in unsheltered Veteran homelessness. Since 2010, more than
360,000 Veterans and their family members have been permanently housed,
rapidly rehoused, or prevented from falling into homelessness.

Backlog

VA transitioned disability compensation claims processing from a
paper-intensive process to a fully electronic processing system; as a
result, 5,000 tons of paper per year were eliminated.
In FY 2015, VA decided a record-breaking 1.4 million disability
compensation and pension (rating) claims for Veterans and their
survivors-the highest in VA history for a single year. As of December
31, 2015, VA had driven down the disability claims backlog to 75,480,
from a peak of over 611,000 in March 2013.

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2016-2017 VA's Agency Priority Goals

In a collaborative, analytic process, VA has established our four
new Agency Priority Goals (APGs). In FYs 2016 and 2017, our four APGs
build upon and preserve progress we made in 2015. The new APGs will
help accelerate transformation to MyVA and advance our framework for
allocating resources to improve Veteran outcomes. Our new APGs are to
(1) Improve Veterans Experience with VA, (2) Improve VA Employee
Experience, (3) Improve Access to Health Care as Experienced by the
Veteran, and (4) Improve Dependency Claims Processing. While no longer
APGs, VA will continue to build upon the progress it has already made
related to ending Veterans' Homelessness and eliminating the
compensation rating claims backlog.

FY 2017 Budget Request

Our 2017 budget requests the necessary resources to allow us to
serve the growing number of Veterans who selflessly served our Nation.
The 2017 Budget requests $182.3 billion for VA-$78.7 billion in
discretionary funding (including medical care collections) and $103.6
billion in mandatory funding for Veterans benefit programs. The
discretionary request reflects an increase of $3.6 billion (4.9
percent) over the 2016 enacted level. The budget also requests 2018
advance appropriations (AAs) of $66.4 billion for Medical Care and
$103.9 billion for three mandatory accounts that support Veterans
benefit payments (i.e., Compensation and Pensions, Readjustment
Benefits, and Insurance and Indemnities).
We value the support that Congress has demonstrated in providing
the resources needed to honor our Nation's Veterans. We are seeking
your support for legislative proposals contained in the 2017 Budget-
including many already awaiting Congressional action-to enhance our
ability to provide Veterans the benefits and services they have earned
through their service. The Budget also proposes a new General Transfer
Authority that would allow VA to move discretionary funds across line
items. Flexible budget authority would give VA greater ability to avoid
artificial restrictions that impede our delivery of care and benefits
to Veterans.

Rising Demand for VA Care and Benefits

Veterans are demanding more services from VA than ever before. As
VA becomes more productive, the demand for benefits and services from
Veterans of all eras continues to increase, and Veterans' demand for
benefits has exceeded VA's capacity to meet it.
In 2014, when the Phoenix access difficulties came to light, VA had
300,000 appointments that could not be completed within 30 days of the
date the Veteran needed or wanted to be seen. To meet that demand, VA
rallied to add capacity to complete 300,000 more appointments each
month, or about 3.5 million additional appointments annually.
Despite these extraordinary measures to increase capacity, VA was
unable to absorb Veterans' increasing demand for health care. The
number of Veterans waiting for appointments more than 30 days rose by
about 50 percent, to roughly 450,000 between 2014 and 2015, so we are
aggressively working on innovative ways to address that challenge, and
VHA's new Access Stand Downs are central to VHA's health care
transformation efforts and addressing that challenge.
The trend of a growing demand for VA health care is fueled by more
than a decade of war, Agent Orange-related disability claims, an
unlimited claim appeal process, demographic shifts, increased medical
issues claimed, and other factors. Additionally, survival rates among
Americans who served in conflicts have increased, and more
sophisticated methods for identifying and treating Veteran medical
issues continue to become available. And, VA now serves a population
that is older, has more chronic conditions, and is less able to afford
care in the private sector. Workload will continue to increase as the
military downsizes and Veterans regain trust in VA.

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In 2017, the number of Veterans receiving medical care at VA will
be over 6 million. VA expects to provide more than 115 million
outpatient visits in 2017, an increase of 8.4 million visits over 2016,
through both VA and Care in the Community.
Compared to FY 2009, the number of patients is projected to
increase by 22 percent by FY 2017. And, as Veterans see the results of
VA's transformation, we are confident that the number of Veterans
utilizing VA services will continue to rise. Currently, 11 million of
the 22 million Veterans in this country are registered, enrolled, or
use at least one VA benefit or service.
Veterans' health care and benefit requirements continue to increase
decades after conflicts' end, and this fact is a fundamental, long-term
challenge for VA. Forty years after the Vietnam War ended, the number
of Vietnam Era Veterans receiving disability compensation has not yet
peaked. VA anticipates a similar trend for Gulf War Era Veterans, only
26 percent of whom have been awarded disability compensation.

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[
Today, there are an estimated 22 million Veterans. The number of
Veterans is projected to decline to around 15 million by 2040. However,
while the absolute number may decline, an aging Veteran population
requires greater care, services, and benefits. In 2017, 46 percent (or
9.8 million) of the 22 million Veteran population will be 65 years old
or older, a dramatic increase since 1975 when only 7.5 percent (or 2.2
million) of the Veteran population was 65 years old or older.
While the percent of the Veteran population receiving compensation
was nearly constant at 8.5 percent for more than 40 years, over the
past 15 years there has been a striking increase to 20 percent. The
total number of service-connected disabilities for Veterans receiving
compensation grew from 11.8 million in 2009 to 19.7 million in 2015, an
increase of more than 67 percent in just six years. This dramatic
growth, combined with estimates based on historic trends, predicts an
even greater increase in claims for more benefits as Veterans age and
disabilities become more acute.

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The increase in Veterans receiving compensation is accompanied by a
significant increase in the average degree of disability granted to
Veterans for disability compensation. For 45 years, from 1950 to 1995,
the average degree of disability held steady at 30 percent. But, since
2000, the average degree of disability has risen to 49 percent. VBA's
mandatory request for 2017 is $103.6 billion, twice the amount spent in
FY 2009.

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As VA continues to improve access and quality of care, more
Veterans will come to VA for more of their care. Veterans today often
choose VA for care either because of personal preference or because of
VA's economic edge. Some 78 percent of enrolled Veterans at VA have
other choices like Medicare, Medicaid, Tricare, or private insurance.
Out-of-pocket cost for Veterans at VA is often lower, and cost
considerations are a key factor in Veterans' demand for VA health care.
In 2014, Veteran enrollees received only 34 percent of their total
health care through VA, accounting for about $53 billion in 2014 costs.
Just a one percent increase in Veteran reliance on VA health care will
increase costs by $1.4 billion.

Productivity Improvements and Stewardship

The MyVA transformation will ensure VA is a sound steward of the
taxpayer dollar. We are instituting operational efficiencies, cost
savings, productivity improvements, and service innovations to support
this and future budget requests. We are assessing all aspects of VA
operations using a business lens and pursuing changes so VA will
deliver care and services more efficiently and effectively at the
highest value to Veterans and taxpayers. For instance, few realize that
when it comes to the general operating expense of distributing over a
hundred-billion dollars in benefits to over 5.3 million Veterans and
survivors, VBA spends only about 3 cents on the dollar. By any measure,
that's an excellent return on investment. Our Reports, Approvals,
Meetings, Measurements, and Policies (RAMMPs) process identifies
practices to streamline or, in some cases, eliminate entirely. To free
capacity and empower employees to identify counter-productive or
wasteful activities that management can eliminate, VA leaders at all
levels of the organization are using RAMMP to address opportunities for
improvement that employees have identified.
To boost efficiency and employee productivity, VA is quickly moving
to paperless claims processing from its historically manual, paper-
intensive process. Modernizing to an electronic claims processing
system has helped VBA increase claim productivity per claims processor
by 25 percent since 2011 and medical issue productivity by 82 percent
per claims processor since 2009. This significant productivity increase
helped mitigate the effects of the 131 percent increase in workload
between 2009 and 2015, when the number of medical issues rose from 2.7
million to 6.4 million. VA's shift to electronic claims processing has
meant converting paper files to eFolders. Between 2012 and 2015, the
Veterans Claims Intake Program (VCIP) scanned nearly 6 million claims
files into Veterans' eFolders in the Veterans Benefits Management
System (VBMS). VBA has removed more than 7,000 tons of claims-related
papers formerly undermining efficiency, hampering productivity, and
cluttering workspace.

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In FY 2015, VBA deployed its innovative Centralized Mail Initiative
to 56 regional offices (ROs) and one pension management center (PMC).
Centralized Mail reroutes inbound compensation and pension claims-
related mail directly to Claims and Evidence Intake Centers at document
conversion services vendor sites, an innovation that improves
productivity and enabled digital analysis of more than four million
mail packets. Through Centralized Mail, VBA can more efficiently manage
the claims workload, and prioritize and distribute claims
electronically across the entire RO network, maximizing resources and
improving processing timeliness.
To strengthen financial management and stewardship, in FY 2015 VA
launched its multi-year effort to replace VA's antiquated, 30-year-old
core Financial Management System (FMS) with a 21st century system that
will vastly improve VA financial management accuracy and transparency.
The modernization effort requires robust enterprise-wide support across
the Department. In FY 2015, VA committed to using a shared service
solution and engaged the Department of Treasury's Office of Financial
Innovation and Transformation (FIT) to pursue a Federal Shared Service
Provider that leverages existing, successful investments and
infrastructure across the government and meets our financial management
system needs while supporting VA's mission of serving Veterans. VA also
stood up a Program Management Office, initially staffed with 5 FTE from
existing resources to lead and manage the effort, and identified an OIT
Project Manager. VA has worked to compile lessons-learned from other
agencies engaged in this effort and from VA's previous attempts to
modernize the FTE, to ensure the effort is successful. Tasks ahead
include strategies, roadmaps, and project plans, business process re-
engineering, and engaging in significant change management activities.
Recent challenges managing non-VA care program finances have
demonstrated the great risks and immense burden of the FMS legacy
system. FMS failure would severely impede the Department's ability to
execute its budget, pay vendors and Veterans, and produce accurate
financial statements.

Closing Unsustainable Facilities

It is well-past time to close VA's old, substandard, and
underutilized facilities. VA's 2016 Budget testimony last year
explained that VA cannot be a sound steward of taxpayer resources with
the asset portfolio it carries, and each year of delay makes the
situation more costly and untenable. No sound business would carry such
a portfolio, and Veterans and taxpayers deserve better.

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VA currently has 370 buildings that are fully vacant or less than
50 percent occupied, which are excess to our needs. These vacant
buildings account for over 5.2 million square feet of unneeded space.
In addition, we have 770 buildings that are underutilized, accounting
for more than 6.3 million square feet that are candidates to be
consolidated to improve utilization and lower costs. This means we have
to maintain over 1,100 buildings and 11.5 million square feet of space
that is unneeded or underutilized - taking funding from needed Veteran
services. We estimate that it costs VA $26 million annually to maintain
and operate these vacant and underutilized buildings. For example, when
attempting to demolish the vacant storage facility in Bedford,
Massachusetts, VA encountered environmental issues that prevented the
demolition, forcing VA to either pay costly remediation costs to
demolish a building we no longer need or maintain facilities such as
this across the system.

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As the Veteran population has migrated, VA's capital infrastructure
has not kept pace. We continue to operate medical facilities where the
Veteran population is small or shrinking. Our smallest hospitals often
do not have sufficient patient volume and complexity of care
requirements to maintain the clinical skills and competencies of
physicians and nurses.

Ensuring Veterans Access to Care

The President's 2017 Budget will allow VA to operate the largest
integrated health care system in the country, including nearly 1,300 VA
sites of health care and approximately 6 million Veterans receiving
care; the eleventh largest life insurance provider, covering both
active duty Servicemembers and enrolled Veterans; compensation and
pension benefit programs serving more than 5.3 million Veterans and
survivors; education benefits to more than one million students;
vocational rehabilitation and employment benefits to more than 140,000
disabled Veterans; a home mortgage program that will guarantee more
than 429,000 new home loans; and the largest national cemetery system
that leads the industry as a high-performing organization, with
projections to inter more than 132,000 Veterans and family members in
2017.
The 2017 Budget requests $65 billion for medical care, an increase
of $3.9 billion (6.3 percent) over the 2016 enacted level. The increase
in 2017 is driven by Veterans' demand for VA health care as a result of
demographic factors, economic assumptions, investments in access, and
high priority investments for caregivers, new Hepatitis C treatments,
and support for Veterans Health Information Systems and Technology
Architecture (VistA) Evolution. The 2017 request supports programs to
end and prevent Veteran homelessness, invests in strategic initiatives
to improve the quality and accessibility of VA health care programs,
continues implementation of the Caregivers and Veterans Omnibus Health
Services Act, and provides for activation requirements for new or
replacement medical facilities. The 2017 appropriations request
includes an additional $1.7 billion above the enacted 2017 AA for
Veterans medical care. The request assumes approximately $3.6 billion
annually in medical collections in 2017 and 2018. For the 2018 Advance
Appropriations for medical care, the current request is $66.4 billion.

Hepatitis C Treatment

Although the Hepatitis C virus infection (HCV) takes years to
progress, it is the main cause of advanced liver disease in the United
States. Treatment of this disease remains a high priority because its
cure dramatically lowers patients' risk of liver failure, liver cancer,
and death.
VA is the largest single provider of care in the Nation for chronic
HCV, and over the next five years, VA will strive to provide treatment
to all Veterans with HCV who are treatment candidates. For FY 2017, VA
is requesting $1.5 billion for the cost of Hepatitis C drugs and
clinical resources. With a budget of $1.5 billion in FY 2017, VA
expects to treat 35,000 patients with HCV. At the beginning of FY 2016,
almost 120,000 Veterans in VA care were awaiting HCV treatment, of whom
approximately 30,000 have advanced liver disease.
VA successfully negotiated extremely favorable pricing for both of
the new treatments available-Harvoni and Viekira-from two different
drug manufacturers by stressing VA's proven ability to deliver market
share, VA's large HCV population, and the long-term impact that VA's
physician residency programs can have on post-residency prescribing
practices.
During FY 2015, VA medical facilities treated more than 30,000
Veterans for HCV with these new drugs with remarkable success,
achieving cure rates of 90 percent, similar to those seen in clinical
trials.
VA clinicians have rapidly adopted new, more effective therapies
for HCV as they have become available. New therapies are costly and
require well-trained clinical providers and support staff, presenting
resource challenges for the Department. VA will focus resources on the
sickest patients and most complex cases and continue to build capacity
for treatment through clinician training and use of telehealth
platforms. Patients with less advanced disease are being offered
treatment through the Veterans Choice program in partnership with
community HCV providers.

Care in the Community

VA is committed to providing Veterans access to timely, high-
quality health care. The 2017 Budget includes $12.2 billion for Care in
the Community and includes a new Medical Community Care budget account,
consistent with the VA Budget and Choice Improvement Act (P.L. 114-41).
Of the total that will be spent on non-VA care in FY 2017, $7.5 billion
will be provided through a transfer of the 2017 enacted AA from the
Medical Services account to the new budget account, and $4.7 billion
will be provided through the resources provided in the Veterans Choice
Act for implementation of the Veterans Choice Program.
The Choice Act increased VA's in-house capacity by funding medical
personnel growth in VA facilities and expanded eligibility for Care in
the Community to ensure access to care within 30 days and to provide
care closer to home for enrollees residing more than 40 miles from a VA
facility (the 40-mile group).
This additional capacity facilitated an increase in enrollees'
reliance on VA health care by more than half a percent over the level
expected in FY 2015. This growth was the result of enrollees increasing
their use of VA funded health care versus their use of other health
care options (Medicare, Medicaid, commercial insurance, etc.).
The FY 2015 growth in enrollee reliance was largely in Care in the
Community, with the 40-mile group generating a more significant
increase in care:
In FY 2015, enrollees' reliance on VA health care
increased by 0.7 percent overall. Reliance for the 40-mile group
increased by 2.8 percent from 32.5 percent to 35.3 percent.
The increase in reliance was mostly driven by growth in
Care in the Community. Cost sharing levels in VA are lower than what is
typically available elsewhere, which provides an incentive for
enrollees to use VA-paid Care in the Community.
Enrollee reliance on VA health care is expected to continue to
increase in 2016 and beyond to service the unmet demand that the Choice
Act was enacted to address.
On October 30, 2015, VA provided Congress with a plan for the
consolidation and improvement of all purchased care programs into one
New Veterans Choice Program (New VCP). Consistent with this report, the
2017 Budget will include legislative proposals to streamline and
improve VA's delivery of Community Care.

Caregiver Support Program

Caregivers give their time and love in countless behind-the-scenes
ways. Whether they are helping with transportation to and from
appointments, helping the Veteran apply for benefits, or helping with
meals, bathing, clothing, medication, the spectrum of care is wide and
compassion runs deep.
The 2017 Budget requests $725 million for the National Caregivers
Support Program to support nearly 36,600 caregivers, up from about
30,600 in FY 2016. Funding requirements for caregivers are driven by an
increase in the eligible Veteran population, with caregiver enrollment
increasing by an average of about 500 each month.

Ending Veteran Homelessness

The ambitious goal of ending Veteran homelessness has galvanized
the Federal government and local communities to work together to solve
this important National problem. Our systems are designed to help
prevent homelessness whenever possible, and our goal is a systematic
end to homelessness, meaning that there are no Veterans sleeping on our
streets and every Veteran has access to permanent housing. Should
Veterans become homeless or be at-risk of becoming homeless, there will
be capacity to quickly connect them to the help they need to achieve
housing stability.
The 2017 Budget supports VA's commitment to ending Veteran
homelessness by emphasizing rescue for those who are homeless today and
prevention for those at risk of homelessness. The 2017 Budget requests
$1.6 billion for VA homeless-related programs, including case
management support for the Department of Housing and Urban Development
(HUD)-VA Supportive Housing program (HUD-VASH), the Grant and Per Diem
Program, VA justice programs, and the Supportive Services for Veteran
Families program.
In FY 2015 and FY 2016, VA committed more than $1.5 billion
annually to strengthen programs that prevent and end homelessness among
Veterans. Communities that have reached the goal or are close to
effectively ending homelessness rely heavily on VA targeted homeless
resources. Communities that have a sustainment plan are depending on
those resources to be available as they continue to tackle homelessness
and sustain the support for Veterans who have moved into permanent
housing, ensuring that they maintain housing stability and do not fall
back into homelessness.
VA will continue to advocate for its continuum of homeless services
to address the needs associated with preventing first-time
homelessness, as well as the needs of those who return to homelessness,
and focus on the root causes associated with homelessness, including
poverty, addiction, mental health, and disability.
Congress has an important role, as well, in ensuring adequate
resources to meet the needs of those most vulnerable Veterans by
enacting authorizations and other legislation to provide VA with a full
complement of tools to combat homelessness-including legislation that
is a prerequisite to carry out dramatic improvements to our West Los
Angeles campus centered on the needs of Veterans.

Benefits Programs

The 2017 Budget requests $2.8 billion and 22,171 FTE for VBA
General Operating Expenses, an increase of $93.4 million (3.4 percent)
over the 2016 enacted level. The request includes an additional 300
full-time equivalent (FTE) employees for non-rating claims.

With the resources requested in the 2017 Budget, VA will provide:

Disability compensation and pension benefits for 5.3
million Veterans and survivors, totaling $86 billion;
Vocational rehabilitation and employment benefits to
nearly 141 thousand disabled Veterans, totaling $1.4 billion;
Education benefits totaling $14 billion to more than one
million Veterans and family members;
Guaranty of more than 429,000 new home loans; and
Life insurance coverage to 1.0 million Veterans, 2.2
million Servicemembers, and 2.8 million family members.

Improving the quality and timeliness of disability claim decisions
has been integral to VBA's transformation of benefits delivery. VBA
successfully streamlined a complex and paper-bound compensation claims
process and implemented people, process, and technology initiatives
necessary to optimize productivity and efficiency. In alignment with
the MyVA initiative, VBA is working to further improve its operations
with a focus on the customer experience. We are implementing
enhancements to enable integration across our programs and
organizational components, both inside and outside of VBA.
VBA has processed an unprecedented number of rating claims in
recent fiscal years (nearly 1.4 million in 2015, and more than 1
million per year for the last 6 years). However, its success has
resulted in other unmet workload demands. As VBA continues to receive
and complete more disability rating claims, the volume of non-rating
claims, appeals, and fiduciary field examinations increases
correspondingly.

Non-rating claims. VA completed nearly 37 percent more
non-rating work in 2015 than 2013-and 15 percent more than 2014. The
2017 Budget requests $29.1 million for an additional 300 non-rating
claims processors to reduce the non-rating claims inventory and provide
Veterans with more timely decisions on non-rating claims.
Appeals. Over the last 20 years, appeal rates have
continued to hold steady at between 11 and 12 percent of completed
claims. As VBA continues to receive and complete record-breaking
numbers of disability rating claims, the volume of appeals
correspondingly increases. As of December 31, 2015, there were more
than 440,000 benefits-related appeals pending in the Department at
various stages in the multi-step appeals process, which divides
responsibility between VBA and the Board of Veterans' Appeals (Board)-
355,803 of those benefits-related appeals are in VBA's jurisdiction and
85,682 are within the Board's jurisdiction.

Under current law, VA appeals framework is complex, ineffective,
and opaque, and veterans wait on average 5 years for final resolution
of an appeal. The 2017 Budget supports the development of a Simplified
Appeals Process to provide veterans with a simple, fair, and
streamlined appeals procedure in which they would receive a final
appeals decision within 365 days from filing of an appeal by FY 2021.
The 2017 Budget provides funding to support over 900 FTE for the Board
and proposes a legislative change that will improve an outdated and
inefficient process which will benefit all veterans through expediency
and accuracy. We look forward to working with Congress, Veterans, and
other stakeholders to implement improvements.

Fiduciary program. The fiduciary program served 29
percent more beneficiaries in 2015 than it served in 2014. Program
growth is primarily due to an increase in the total number of
individuals receiving VA benefits and an aging population of
beneficiaries. Additionally, in 2015 the fiduciary program changed the
way it captures beneficiary population data and now reports all
beneficiaries served during the course of the fiscal year. In 2015,
fiduciary personnel conducted more than 84,000 field examinations, and
VBA anticipates field examination requirements will exceed 97,000 in
2017.
Housing program. The 2017 Budget includes $34 million for
the VA Loan Electronic Reporting Interface (VALERI) to manage the 2.4
million VA guaranteed loans for Veterans and their families. VALERI
connects VA with more than 320,000 Veteran borrowers and more than
225,000 mortgage servicer contacts. VA uses the VALERI tool to manage
and monitor efforts taken by private-sector loan servicers and VA staff
in providing timely and appropriate loss mitigation assistance to
defaulted borrowers. Without these resources, approximately 90,000
Veterans and their families would be in jeopardy of losing their homes
each year, potentially costing the government an additional $2.8
billion per year. VALERI also supports payment of guaranty and
acquisition claims.

The Budget requests the following advance appropriations amounts
for 2018: $90.1 billion for compensation and pensions, $13.7 billion
for readjustment benefits, and $107.9 million for insurance and
indemnities. VA will continue to closely monitor workload and monthly
expenditures in these programs and will revise cost estimates as
necessary in the Mid-Session Review of the 2017 Budget, to ensure the
enacted advance appropriation levels are sufficient to address
anticipated veteran needs throughout the year.

The Simplified Appeals Initiative

The current VA appeals process is broken. The more than 80-year-old
process was conceived in a time when medical treatment was far less
frequent than it is today, so it is encumbered by some antiquated laws
that have evolved since WWI and steadily accumulated in layers.
Under current law, the VA appeals framework is complex,
ineffective, confusing, and understandably frustrating for Veterans who
wait much too long for final resolution of their appeal. The current
appeals system has no defined endpoint, and multiple steps are set in
statute. The system requires continuous evidence gathering and multiple
re-adjudications of the very same or similar matter. A Veteran,
survivor, or other appellant can submit new evidence or make new
arguments at any time, while VA's duty to assist requires continuous
development and re-adjudication. Simply put, the VA appeals process is
unlike other standard appeals processes across Federal and judicial
systems.
Fundamental legislative reform is essential to ensure that Veterans
receive timely and quality appeals decisions, and we must begin an
open, honest dialogue about what it will take for us to provide
Veterans with the timely, fair, and streamlined appeals decisions they
deserve. To put the needs, expectations, and interests of Veterans and
beneficiaries first-a goal on which we can all agree-the appeals
process must be modernized.

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The 2017 Budget proposes a Simplified Appeals Process-legislation
and resources (i.e., people, process, and technology) that would
provide Veterans with a simple, fair, and streamlined appeals process
in which they would receive a final decision on their appeal within one
year from filing the appeal by FY 2021.
The 2017 Budget requests $156.1 million and 922 FTE for the Board,
an increase of $46.2 million and 242 FTE above the FY 2016 enacted
level. This is a down-payment on a long-term, sustainable plan to
provide the best services to Veterans. This policy option also
represents the best value to taxpayers (as outlined in the chart,
Analysis of Alternatives).
Without legislative change or significant increases in staffing, VA
will face a soaring appeals inventory, and Veterans will wait even
longer for a decision on their appeal. If Congress fails to enact VA's
proposed legislation to simplify the appeals process, Congress would
need to provide resources for VA to sustain more than double its
appeals FTE, with approximately 5,100 appeals FTE onboard. The prospect
of such a dramatic increase, while ignoring the need for structural
reform, is not a good result for Veterans or taxpayers.

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While the Simplified Appeals proposal would require FTE increases
for the first several years to resolve the more than 440,000 currently
pending appeals, by 2022, VA would be able to reduce appeals FTE to a
sustainment level of roughly 1,030 FTE (including 980 FTE at the Board
and 50 at VBA), a level sufficient to process all simplified appeals in
one year. Notably, such a sustainment level is 1,135 FTE less than the
current 2016 budget requires, and is 4,070 FTE less Department-wide
than would be required to address this workload with FTE resources
alone. In addition, this reform would essentially eliminate the need
for appeals FTE at VBA, allowing these resources to be redirected
within VBA to other priorities.
In 2015, the Board was still adjudicating an appeal that originated
25 years ago, even though the appeal had previously been decided by VA
more than 27 times. Under the Simplified Appeals Process, most Veterans
would receive a final appeals decision within one year of filing an
appeal. Additionally, rather than trying to navigate a multi-step
process that is too complex and too difficult to understand, Veterans
would be afforded a transparent, single-step appeal process with only
one entity responsible for processing the appeal. Essentially, under a
simplified appeals process, as soon as a Veteran files an appeal, the
case would go straight to the Board where a Judge would review the same
record considered by the initial decision-maker and issue a final
decision within one year; informing the Veteran whether that initial
decision was substantially correct, contained an error that must be
corrected, or was simply wrong. If a Veteran disagrees with any or all
of the final appeals decision, the Veteran always has the option of
filing a new claim for the same benefit once the appeal is resolved, or
may pursue an appeal to the Court of Appeals for Veterans Claims.

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Rapid growth in the appeals workload exacerbates this challenge. As
VBA has produced record-setting claims-decision output over the past
five years, appeals volume has grown commensurately. Between December
2012 and November 2015, the number of pending appeals rose by 34
percent. Under current law with no radical change in resources, the
number of pending appeals is projected to soar by 397 percent-from
437,000 to 2.17 million (chart, Status of Appeals)-between November
2015 and FY 2027.

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VA firmly believes that justice delayed is justice denied. In the
streamlined appeals process proposed in the FY 2017 President's Budget
(chart, Proposed Simplified Appeals), there would be a limited
exception allowing the Board to remand appeals to correct duty to
notify and assist errors made on the part of the Agency of Original
Jurisdiction (AOJ) prior to issuance of the initial AOJ decision.

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Medical and Prosthetic Research

The 2017 Budget continues VA's program of groundbreaking, high
standard research focused on advancing the health care needs of all
Veterans. The 2017 Budget requests $663 million for Medical Research
and supports the President's Precision Medicine Initiative (PMI) to
drive personalized medical treatment and the evolving science of
Genomic Medicine-how genes affect health. In addition to the direct
appropriation, Medical Research will be supported through $1.3 billion
from VA's Medical Care program and other Federal and non-Federal
research grants. Total funding for Medical and Prosthetic Research will
be more than $2.0 billion in 2017.
VA research is focused on the U.S. Veteran population and allows VA
to uniquely address scientific questions to improve Veteran health
care. Most VA researchers are also clinicians and health care providers
who treat patients. Thus, VA research arises from the desire to heal
rather than pure scientific curiosity and yields remarkable returns.

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For more than 90 years, VA research has produced cutting-edge
medical and prosthetic breakthroughs that improve the lives of Veterans
and others. The list of accomplishments includes therapies for
tuberculosis following World War II, the implantable cardiac pacemaker,
computerized axial tomography (CAT) scans, functional electrical
stimulation systems that allow patients to move paralyzed limbs, the
nicotine patch, the first successful liver transplants, the first
powered ankle-foot prosthesis, and a vaccine for shingles. VA
researchers also found that one aspirin a day reduces by half the rate
of death and nonfatal heart attacks in patients with unstable angina.
More recently, VA investigators tested an insulin nasal spray that
shows great promise in warding off Alzheimer's disease and found that
prazosin (a well-tested generic drug used to treat high blood pressure
and prostate problems) can help improve sleep and lessen nightmares for
those with post-traumatic stress disorder.
Beyond VA's support of more than 2,200 continuing research
projects, VA will leverage our Million Veteran Program (MVP)-already
one of the world's largest databases of genetic information-to support
several Precision Medicine Initiatives. The first initiative will
evaluate whether using a patient's genetic makeup to inform medication
selection is effective in reducing complications and getting patients
the most effective medication for them. This initiative will focus on
up to 21,500 Veterans with PTSD, depression, pain, and/or substance
abuse.

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The second initiative will focus on additional analysis of DNA
specimens already collected in the MVP. More than 438,000 Veteran
volunteers have contributed DNA samples so far. Genomic analysis on
these DNA specimens allows researchers to extract critical genetic
information from these specimens. There are several possible ``levels''
of genomic analyses, with increasing cost.
Built into the design of MVP and currently funded within the VA
research program is a process known as ``exome chip'' genotyping-the
tip of the iceberg in genomic analysis. Exome Chip genotyping provides
useful information, but newer technologies promise significantly
greater information for improving treatments. VA proposes conducting
the next level of analysis, known as ``exome sequencing,'' on up to
100,000 Veterans who are enrolled in MVP. This exome sequencing
analyzes the part of the genome that codes for proteins-the large,
complex molecules that perform most critical functions in the body.
Sequencing efforts will begin with a focus on Veterans with PTSD and
frequently co-occurring conditions such as depression, pain, and
substance abuse, and expand to other chronic illnesses such as diabetes
and heart disease, among others. This more detailed genetic analysis
will provide greater information on the biological factors that may
cause or increase the risk for these illnesses.
VA's research and development program improves the lives of
Veterans and all Americans through health care discovery and
innovation.

Other Priorities

Information Technology

The 2017 Budget demonstrates VA's commitment to using cutting-edge
information technology (IT) to support transformation and ensure that
the Veteran is at the center of everything we do. The Budget requests
$4.28 billion-an increase of $145 million (3.5 percent) from the 2016
enacted level-to help stabilize and streamline core processes and
platforms, eliminate the information security material weakness, and
institutionalize new capabilities to deliver improved outcomes for
Veterans. The request includes $471 million for new efforts to develop,
improve, and enhance clinical and benefits systems and processes and
supports VA's strategy to replace FMS. The 2017 Budget was developed
through Federal IT Acquisition Reform Act (FITARA) compliant processes
led by the Chief Information Officer (CIO), in concert with the Chief
Financial Officer and Chief Acquisition Officer.
In FY 2015, the Office of Information and Technology (OIT)
developed an IT Enterprise Strategy and an Enterprise Cybersecurity
Strategy. These strategies support OIT's vision to become a world-class
organization that provides a seamless, unified Veteran experience
through the delivery of state-of-the-art technology. OIT is
implementing a new IT Security Strategy to improve VA's security
posture and eliminate the Federal Information Security Management Act/
Federal Information System Controls Audit Manual material weakness.
The 2017 Budget includes $370.1 million for information security,
an increase of 105 percent over the FY 2016 funding level. In addition,
the 2017 Budget includes $50 million to launch a new Data Management
program to use data as a strategic resource. Under this program, VA
will inventory its data collection activities-with the objective of
requesting data from the Veteran only once-and dispose expired
information in a secure and timely way. These two aspects will reduce
VA costs for data storage and support safeguards for Veterans'
information.

National Cemetery Administration

The National Cemetery Administration (NCA) has the solemn duty to
honor Veterans and their families with final resting places in national
shrines and with lasting tributes that commemorate their service and
sacrifice to our Nation. The 2017 Budget requests $286 million, an
increase of $15 million (5.5 percent) to allow VA to provide perpetual
care for more than 3.5 million gravesites and more than 8,800 developed
acres. The Budget supports NCA's efforts to raise and realign
gravesites and repair turf in order to maintain cemeteries as national
shrines. The Budget also continues implementation of a Geographic
Information System to enable enhanced accounting of remains and
gravesites and enhanced gravesite location for visitors. The Budget
positions NCA to meet Veterans' emerging burial and memorial needs in
the decades to come by ensuring that Veterans and their families
continue to have convenient access to a burial option in a National,
state, or tribal Veterans cemetery and that the service they receive is
dignified, respectful, and courteous.

VA Infrastructure

The 2017 Budget requests $900.2 million for VA's Major and Minor
construction programs. The Budget invests in infrastructure projects at
existing campuses that will lead to seismically safe facilities,
ensuring that Veterans are safe when they seek care. The capital asset
budget request demonstrates VA's commitment to address critical Major
construction projects that directly affect patient safety and seismic
issues, and reflects VA's promise to provide safe and secure facilities
for Veterans. The 2017 Budget also requests funding to ensure that VA
has the ability to provide eligible Veterans with access to burial
services through new and expanded cemeteries, and prevent the closure
to new interments in existing cemeteries.
VA acknowledges the transformation underway in the landscape for
health care delivery. Our future space needs may be impacted by the
changes we are already implementing in how we deliver care for
Veterans. In addition, we plan to potentially incorporate any
recommendations from the Commission on Care and their impact on our
changing service delivery into our long-term infrastructure strategy.
Leasing provides flexibility and enables VA to more quickly adapt
to changes in medical technology, workload, new programs, and
demographics. VA is also looking to Congress for authorization of 18
leases submitted in VA's FY 2015 and 2016 Budget requests. The pending
major medical facility lease projects will replace, expand, or create
new outpatient clinics and research facilities and are critical for
providing access for Veterans and enhancing our research capabilities
nationwide. The 2017 Budget includes a request to authorize six
additional replacement major medical facility leases under VA's
authority in 38 U.S.C. Sec. Sec. 8103 and 8104 and with the
anticipated delegation of leasing authority from the General Services
Administration. The Department is awaiting authorization of its request
to expand the definition of ``Medical Facilities'' in VA's authorizing
statutes to allow VA to more easily partner with other Federal
agencies. Another proposal that deserves attention is authorization of
enhanced use lease (EUL) authority to encompass broader possibilities
for mixed-use projects. This change would give VA more opportunities to
engage the private sector, local governments, and community partners by
allowing VA to use underutilized property that would benefit Veterans
and VA's mission and operations.

Major Construction

The 2017 Budget requests $528.1 million for Major Construction. The
request includes funds to address seismic problems in facilities in
Long Beach, California, and Reno, Nevada. These projects will correct
critical safety and seismic deficiencies that pose a risk to Veterans,
VA staff, and the public. Consistent with Public Law 114-58, the
Department must identify a non-VA entity to execute these two projects,
as they are more than $100 million. We have identified the U.S. Army
Corps of Engineers as our construction agent to execute these projects.
We must prevent the devastation and potential loss of life that may
occur because our facilities are vulnerable to earthquakes-such as the
one that occurred in 1971 in San Fernando, California. As shown, a 6.5-
magnitude earthquake caused two buildings in the San Fernando Medical
Center to collapse and 46 patients and staff to lose their lives.

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These images show a known seismic deficiency at the San Francisco
Medical Center-built in 1933-wherein the rebar does not extend into the
``pile cap.''
The request also includes funding for new national cemeteries in
western New York and southern Colorado, and national cemetery
expansions in Jacksonville, Florida and South Florida. These cemetery
projects support NCA's goal to ensure that eligible Veterans have
access to a burial option within a reasonable distance from their
residences.

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The new western New York national cemetery will establish
a dignified burial option for more than 96,000 Veterans plus eligible
family members in the western New York region.
The new southern Colorado national cemetery will
establish a dignified burial option for more than 95,000 Veterans plus
eligible family members in the southern Colorado region.
The Jacksonville National Cemetery expansion will develop
approximately 30 acres of undeveloped land to provide approximately
20,200 gravesites.
The South Florida National Cemetery expansion will
develop approximately 25 acres of undeveloped land to provide
approximately 21,750 gravesites.

Minor Construction

In 2017, the Budget requests $372 million for Minor Construction.
The requested amount would provide funding for ongoing projects that
renovate, expand and improve VA facilities, while increasing access for
our Veterans. Examples of projects include enhancing women's health
programs; providing additional domiciliaries to further address
Veterans' homelessness; improving safety; mitigating seismic
deficiencies; transforming facilities to be more Veteran-centric;
enhancing patient privacy; and enhancing research capabilities.
The Minor Construction request will also provide funding for
gravesite expansion and columbaria projects to keep existing national
cemeteries open, and will support NCA's urban and rural initiatives. It
will also provide funding for projects at VBA regional offices
nationwide and will fund infrastructure repairs and enhancements to
improve operations for the Department's staff offices.

Leasing

The 2017 Budget includes a request to authorize six replacement
major medical facility leases located in Corpus Christi, Texas;
Jacksonville, Florida; Pontiac, Michigan; Rochester, New York; Tampa,
Florida; and Terre Haute, Indiana. These leases will allow VA to
provide continued access to Veterans that are served in these
locations.

MyVA Transformation

MyVA puts Veterans in control of how, when, and where they wish to
be served. It is a catalyst to make VA a world-class service provider-a
framework for modernizing VA's culture, processes, and capabilities to
put the needs, expectations, and interests of Veterans and their
families first. A Veteran walking into any VA facility should have a
consistent, high-quality experience.
MyVA will build upon existing strengths to promote an environment
where VA employees see themselves as members of one enterprise,
fortified by our diverse backgrounds, skills, and abilities. Moreover,
every VA employee-doctor, rater, claims processor, custodian, or
support staffer, or the Secretary of Veterans Affairs-will understand
how they fit into the bigger picture of providing Veteran benefits and
services. VA, of course, must also be a good steward of public
resources. Citizens and taxpayers should expect to see efficiency in
how we run our internal operations.

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The FY 2017 budget will make investments toward the five critical
MyVA objectives:

1. Improving the Veteran experience: At a bare minimum, every
contact between Veterans and VA should be predictable, consistent, and
easy; however, we are aiming to make each touchpoint exceptional. It
begins with receptionists who are pleasant to our Veteran clients, but
there is also a science to this experience. We are focusing on human-
centered design, process mapping, and working with leading design firms
to learn and use the technology associated with improving every
interaction with clients.
2. Improving the employee experience-so we can better serve
Veterans: VA employees are the face of VA. They provide care,
information, and access to earned benefits. They serve with distinction
daily. We cannot make things better for Veterans without improving the
work experience of our dedicated employees. We must train them. We must
move from a rules/fear-based culture to a principles/values-based
culture. I learned in the private sector that it is absolutely not a
coincidence that the very best customer-service organizations are
almost always among the best places to work.
3. Improving internal support services: We will let employees and
leaders focus on assisting Veterans, rather than worrying about ``back
office'' issues. We must bring our IT infrastructure into the 21st
century. Our scheduling system, where many of our issues with access to
care were manifest, dates to 1985. Our Financial Management System is
written in COBOL, a language I used in 1973. This is simply
unacceptable. It impedes all of our efforts to best serve Veterans.
4. Establishing a culture of continuous improvement: We will apply
Lean strategies and other performance improvement capabilities to help
employees examine their processes in new ways and build a culture of
continuous improvement.
5. Enhancing strategic partnerships: Expanding our partnerships
will allow us to extend the reach of services available for Veterans
and their families. We must work effectively with those who bring
capabilities and resources to help Veterans.

Breakthrough Priorities for CY 2016

While we have made progress, we are still on the first leg of a
multi-year journey. We have narrowed down our near-term focus to 12
``breakthrough priorities.''
Many of these reflect issues which are not new-they have been known
problems, in some cases, for years. We have already seen some progress
in solving many of them. However, we still have much work to do.
The following are our 12 priorities and the 2016 outcomes to which
we aspire. We understand that it will be a challenge to accomplish all
of these goals this year, but we have committed ourselves to producing
results for Veterans and creating irreversible momentum to continue the
transformation in future years.

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Veteran Facing Goals

1. Improve the Veteran Experience.

Breakthrough Outcome for 2016:

I Strengthen the trust in VA to fulfill our country's commitment
to Veterans; currently measured at 47 percent, we want it to be 70
percent by year end.
I Establish a Department-wide customer experience measurement
framework to enable data-driven service improvements.
I Make the Veterans Experience office fully operational.
I Expand the network of Community Veteran Engagement Boards to
more than 100.
I Additionally, in order to deliver experiences to Veterans that
are effective, easy, and in which Veterans feel valued, medical centers
will ensure that they are fully staffed at the frontline with well-
prepared employees who have been selected for their customer service.
Functionally, this means new frontline staff will be assessed through a
common set of customer service criteria, hired within 30 days of
selection, and provided a nationally standardized onboarding and
training program.

2. Increase Access to Health Care.

Breakthrough Outcome for 2016:

I When Veterans call or visit primary care facilities at a VA
Medical Center, their clinical needs will be addressed the same day.
I When Veterans call for a new mental health appointment, they
receive a suicide risk assessment and immediate care if needed.
Veterans already engaged in mental health care identifying a need for
urgent attention will speak with a provider the same day.
I Utilizing existing VistA technology, Veterans will be able to
conveniently get medically necessary care, referrals, and information
from any VA Medical Center, in addition to the facility where they
typically receive their care.

3. Improve Community Care.

Breakthrough Outcome for 2016: Improve the Veterans'
experience with Care in the Community. Following enactment of our
requested legislation, by the end of the year:
I VA will begin to consolidate and streamline its non-Department
Provider Network and improve relationships with community providers and
core partners.
I Veterans will be able to see a community provider within 30 days
of their referral.
I Non-Department claims will be processed and paid within 30 days,
85 percent of the time.
I Health care claims backlog will be reduced to less than 10
percent of total inventory.
I Referral and authorization time will be reduced.

4. Deliver a Unified Veteran Experience.

Breakthrough Outcome for 2016:

I Vets.gov will be able to provide Veterans, their families, and
caregivers with a single, easy-to use, and high-performing digital
platform to access the VA benefits and services they have earned.
I Vets.gov will be data-driven and designed such that the top 100
search terms will be available within one click from search results.
The top 100 search terms will all be addressed within one click on the
site.
I All current content, features and forms from the current public-
facing VA Web sites will be redesigned, rewritten in plain language,
and migrated to Vets.gov, in priority order based on Veteran demand.
I Additionally, we will have one authoritative source of customer
data; eliminating the disparate streams of Administration-specific data
that require Veterans to replicate inputs.

5. Modernize our Contact Centers (Including Veterans Crisis Line).

Breakthrough Outcome for 2016:
I Veterans will have a single toll free phone number to access the
VA Contact Centers, know where to call to get their questions answered,
receive prompt service and accurate answers, and be treated with
kindness and respect. VA will do this by establishing the initial
conditions necessary for an integrated system of customer contact
centers.
I By the end of this year, every Veteran in crisis will have his
or her call promptly answered by an experienced responder at the
Veterans Crisis Line.

6. Improve the Compensation & Pension (C&P) Exam Process.

Breakthrough Outcome for 2016:
I Improved Veteran satisfaction with the C&P Exam process. We will
have a baseline satisfaction metric in place by the end of February and
will set a goal for significant improvement once we know our baseline.
I VA will have a national rollout of initiatives to ensure the
experience is standardized across the Nation.

7. Develop a Simplified Appeal Process.

Breakthrough Outcome for 2016:

I Subject to successful legislative action, put in place a
simplified appeals process, enabling the Department to resolve 90
percent of appeals within one year of filing by 2021.
I Increase current appeals production to more rapidly reduce the
existing appeals inventory.

8. Continue Progress in Reducing Veteran Homelessness.

Breakthrough Outcome for 2016:

I Continue progress toward an effective end to Veteran
homelessness by permanently housing or preventing homelessness for an
additional 100,000 Veterans and their family members,

VA Internal Facing Goals

9. Improve the Employee Experience (Including Leadership Development).

Breakthrough Outcome for 2016:

I Continue to improve the employee experience by developing
engaged leaders at all levels who inspire and empower all employees to
deliver a seamless, integrated, and responsive VA customer service
experience.
I More than 12,000 engaged leaders skilled in applying LDL
principles, concepts, and tools will work projects and/or initiatives
to make VA a more effective and efficient organization.
I Improve VA's employee experience by incorporating LDL principles
into VA's leadership and supervisor development programs and courses of
instruction.
I VA Senior Executive performance plans will include an element
that targets how to improve employee engagement and customer service,
and all VA employees will have a customer service standard in their
performance plans.
I All VA supervisors will have a customer service standard in
their performance plans.
I VA will begin moving from paper-based individual development
plans to a new electronic version, making it easier for both
supervisors and employees.

10. Staff Critical Positions.

Breakthrough Outcome for 2016:

I Achieve significantly improved critical staffing levels that
balance access and clinical productivity, with targets of 95 percent of
Medical Center Director positions filled with permanent appointments
(not acting) and 90 percent of other critical shortages addressed-
management as well as clinical.
I Work to reduce ``time to fill'' hiring standards by 30 percent.

11. Transformation the Office of Information & Technology (OIT).

Breakthrough Outcome for 2016: Achieve the following key
milestones on the path to creating a world-class IT organization
that improves the support to business partners and Veterans.

I Begin measuring IT projects based on end product delivery,
starting with a near-term goal to complete 50 percent of projects on
time and on budget.
I Stand up an account management office.
I Develop portfolios for all Administrations.
I Tie all supervisors' and executives' performance goals to
strategic goals.
I Close all current cybersecurity weaknesses.
I Develop a holistic Veteran data management strategy.
I Implement a quality and compliance office.
I Deploy a transformational vendor management strategy.
I Ensure implementation of key initiatives to improve access to
care.
I Establish one authoritative source for Veteran contact
information, military service history, and Veteran status.
I Finalize the Congressionally mandated DoD-VA Interoperability
requirements.

12. Transform Supply Chain.

Breakthrough Outcome for 2016:

I Build an enterprise-wide integrated Medical-Surgical supply
chain that leverages VA's scale to drive an increase in responsiveness
and a reduction in operating costs. More than $150 million in cost
avoidance will be redirected to priority Veteran programs.

We are rigorously managing each of these ``breakthrough
priorities'' by instituting a Department level scorecard, metrics, and
tracking system. Each priority has an accountable and responsible
official and a cross-functional, cross-Department team in support. Each
team meets every other week in person with either the Secretary or
Deputy Secretary to discuss progress, identify roadblocks, and problem
solve solutions. This is a new VA-more transparent, collaborative, and
respectful; less formal and bureaucratic; more execution and outcome-
focused; principles based, not rules-based.

Legislative Priorities

The Department is grateful for your continuing support of Veterans
and appreciates your efforts to pass legislation enabling VA to provide
Veterans with the high-quality care they have earned and deserve. We
have identified a number of necessary legislative items that require
action by Congress in order to best serve Veterans going forward:

1. Improve Care in the Community: We need your help, as discussed
on many occasions, to help overhaul our Care in the Community programs.
VA staff and subject matter experts have communicated regularly with
congressional staff to discuss concepts and concerns as we shape the
future plan and recommendations. We believe that together we can
accomplish legislative changes to streamline Care in the Community
programs before the end of this session of Congress.
2. Flexible Budget Authority: We need flexible budget authority to
avoid artificial restrictions that impede our delivery of care and
benefits to Veterans. Currently, there are more than 70 line items in
VA's budget that dedicate funds to a specific purpose without adequate
flexibility to provide the best service to Veterans. These include
limitations within the same general areas, such as health care funds
that cannot be spent on health care needs. These restrictions limit
VA's ability to deliver Veteran care and benefits based on demand,
rather than specific funding lines. The 2017 Budget proposes language
to provide VA with new authority to transfer up to two percent of the
discretionary appropriations for fiscal year 2017 between any of VA's
discretionary appropriations accounts. This new authority would give VA
greater ability to address emerging needs and overcome artificial
funding restrictions on providing Veterans' care and benefits.
3. Support for the Purchased Health Care Streamlining and
Modernization Act: This legislation would clarify VA's ability to
contract with providers in the community on an individual basis,
outside of Federal Acquisition Regulations (FAR), without forcing
providers to meet excessive compliance burdens, while maintaining
essential worker protections. The proposal allows this option only when
care directly from VA or from a non-VA provider with a FAR-based
agreement in place is not feasibly available. Already, we have seen
certain nursing homes not renew their agreements with VA because of the
excessive compliance burdens, and as a result, Veterans are forced to
find new nursing home facilities for residence.
VA further requests your support for our efforts to recruit and
retain the very best clinical professionals. These include, for
example, flexibility for the Federal work period requirement, which is
inconsistent with private sector medicine, and special pay authority to
help VA recruit and retain the best talent possible to lead our
hospitals and health care networks.
4. Special Legislation for VA's West Los Angeles Campus: VA has
requested legislation to provide enhanced use leasing authority that is
necessary to implement the Master Plan for our West Los Angeles Campus.
That plan represents a significant and positive step for Veterans in
the Greater West Los Angeles area, especially those who are most in
need. We appreciate the Committee's hearing in December 2015 on
legislation to implement that Master Plan, and VA urges your support
for expedited consideration of this bill to secure enactment of it in
this session of Congress. Enactment of the legislation will allow us to
move forward and get positive results for the area's Veterans after
years of debate in the community and court action. This bill would
reflect the settlement of that litigation, and truly be a win-win for
Veterans and the community. I believe this is a game-changing piece of
legislation as it highlights the opportunities that are possible when
VA works in partnership with the community.
5. Overhaul the Claims Appeals Process: As mentioned earlier, VA
needs legislation that sets out structural reforms that will allow VBA
and the Board to provide Veterans with the timely, fair, and quality
appeals decisions they deserve thereby addressing the growing inventory
of appeals.

Lastly, let me again remind everyone that the vast majority of VA
employees are hard workers who do the right thing for Veterans every
day. However, we need your assistance in supporting the cultural change
we are trying to drive. We are working to change the culture of VA from
one of rules, fear, and reprisals to one of principles, hope, and
gratitude. We need all stakeholders in this transformation to embrace
this cultural transformation, including Congress. In fact, I think
Congress, above all, recognizes the policy window we have at hand and
must have the courage to make the type of changes it is asking VA and
our employees to make. Congress can only put Veterans first by caring
for those who serve Veterans.
Our dedicated VA employees, if given the right tools, training, and
support, can and go out of their way to provide the best care possible
to our Veterans and their families.

Closing

VA exists to serve Veterans. We have spent the last year and a half
working to find new and better ways to provide high quality care and
administer benefits effectively and efficiently through responsible use
of taxpayer dollars. We will continue to face enormous challenges, and
this budget request will provide the resources needed to continue the
transformation of this Department.
This budget and associated legislative proposals will allow us to
streamline care for Veterans and improve access by addressing existing
gaps, develop a simplified appeals process, further the progress we
have made to eliminate the VBA claims backlog and end Veteran
homelessness, and improve our cyber security posture to protect Veteran
and employee data. It will also allow us to continue implementing MyVA
to guide overall improvements to VA's culture, processes, and
capabilities.
I have pledged that VA will ensure that the funds Congress
appropriates to VA will be used to improve both the quality of life for
Veterans and the efficiency of our operations. I am proud to continue
this work and recognize there is much left to be done. We have made
great strides and are grateful for the support of Congress through this
transformation.
Thank you for the opportunity to appear before you today and for
your continued steadfast support of Veterans. We look forward to your
questions.

Statements For The Record

GOVERNMENT ACCOUNTABILITY OFFICE
Statement for the Record by Randall B. Williamson, Director, Health
Care
Letter
Chairman Miller, Ranking Member Brown, and Members of the
Committee,
I am pleased to submit this statement on preliminary observations
from our ongoing work examining the Department of Veterans Affairs'
(VA) projected funding gap in its fiscal year 2015 medical services
appropriation account. As you know, VA's Veterans Health Administration
operates one of the largest health care delivery systems in the nation-
serving about 6.6 million patients-and had total budgetary resources of
nearly $51 billion for medical services in fiscal year 2015. In June
2015, VA requested additional amounts from Congress because it
projected a funding gap of about $3 billion in its medical services
appropriation account. \1\ On July 31, 2015, the VA Budget and Choice
Improvement Act provided VA temporary authority to use up to $3.3
billion from the Veterans Choice Program appropriation for obligations
incurred for other specified medical services, starting May 1, 2015 and
ending October 1, 2015, to address its fiscal year 2015 projected
funding gap. \2\ The Veterans Choice Program, which was established by
statute in 2014, generally allows veterans to obtain care from a
network of providers when their local VA medical centers (VAMC) cannot
provide the services due to long wait times or the distance from
veterans' homes. \3\
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\1\ In this statement, the projected funding gap refers to the
period in fiscal year 2015 when VA's obligations for medical services
were projected to exceed its available budgetary authority for that
purpose for that year. The Antideficiency Act prohibits agencies from
incurring obligations in excess of available budget authority. 31
U.S.C. Sec. 1341(a). An obligation is defined as a ``definite
commitment that creates a legal liability of the government for the
payment of goods and services ordered or received, or a legal duty on
the part of the United States that could mature into a legal liability
by virtue of actions on the part of the other party beyond the control
of the United States.'' GAO, A Glossary of Terms Used in the Federal
Budget Process, GAO 05 734SP (Washington, D.C.: September 2005), p. 70.
We did not determine whether an Antideficiency Act violation occurred,
as such an evaluation was beyond the scope of our ongoing work.
\2\ Pub. L. No. 114-41, Sec. Sec. 4001, 4004, 129 Stat. 443, 463-
464 (2015).
\3\ To address concerns about long wait times for care, in 2014,
the Veterans Access, Choice, and Accountability Act of 2014 was enacted
to, among other things, establish the Veterans Choice Program. Pub. L.
No. 113-146, Sec. 101,128 Stat. 1754, 1755-1765 (2014).
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We and others have reported on past challenges VA has faced
regarding the reliability, transparency, and consistency of its budget
estimates for medical services used to support the President's budget
request, as well as the agency's ability to accurately track
obligations for medical services. For example, in February 2012, we
reported that VA's estimated savings from operational improvements for
providing medical services-used to support both the President's budget
request for fiscal year 2012 and VA's advance appropriations request
for fiscal year 2013-lacked analytical support or were flawed, raising
questions regarding the reliability of the estimated savings. \4\ In
addition, according to VA's 2014 Performance and Accountability Report,
VA has financial system deficiencies and lacks an adequate process to
validate its reported obligations. \5\ In light of these challenges,
coupled with VA's fiscal year 2015 projected funding gap, members of
Congress have questioned VA's ability to accurately estimate its
budgetary needs for future years and track its obligations for medical
services.
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\4\ See GAO, VA Health Care: Methodology for Estimating and Process
for Tracking Savings Need Improvement, GAO 12 305 (Washington, D.C.:
Feb. 27, 2012). Proposed savings included savings from operational
improvements and management initiatives that are included in VA's
budget justifications. The Veterans Health Care Budget Reform and
Transparency Act of 2009 provided that VA's annual appropriations for
health care also include advance appropriations that become available 1
fiscal year after the fiscal year for which the appropriations act was
enacted. Pub. L. No. 111-81, Sec. 3, 123 Stat. 2137, 2137-38 (2009),
codified at 38 U.S.C. Sec. 117. The act provided for advance
appropriations for VA's Medical Services, Medical Support and
Compliance, and Medical Facilities appropriations accounts and directed
VA to include with information it provides Congress in connection with
the annual appropriations process detailed estimates of funds needed to
provide its health care services for the fiscal year for which advance
appropriations are to be provided.
\5\ See VA, 2014 Performance and Accountability Report (Washington,
D.C.: Nov. 12, 2014).
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My statement today will discuss our preliminary observations on
1. the activities or programs that accounted for VA's fiscal year
2015 projected funding gap in its medical services appropriation
account, and
2.changes VA has made to prevent potential funding gaps in future
years.
My statement today is based on our ongoing work examining VA's
fiscal year 2015 projected funding gap in its medical services
appropriation account. To examine the activities or programs that
accounted for this projected funding gap, we reviewed fiscal year 2015
obligation data and documents provided by VA, including requests for
VA's fiscal year 2015 and 2016 budgets; VA's requests to Congress for
the authority to transfer funds between its appropriations; internal
memos and communications; and documents related to the projection model
used by VA to estimate the utilization of and associated costs for
activities funded through its medical services appropriation account.
We analyzed this information to examine the activities or programs in
VA's medical services budget that accounted for the projected funding
gap in fiscal year 2015, as well as the extent to which and reasons
that each activity or program contributed to the projected funding gap.
We also interviewed officials from VA and the Office of Management and
Budget (OMB) to identify the steps taken to address the projected
funding gap.
To examine the changes VA has made or is planning to make to help
prevent potential funding gaps in future years, we obtained and
reviewed VA documents, including VA policy memoranda and internal
reports, and interviewed VA officials. We analyzed this information to
identify new or updated processes for projecting future budgetary needs
and tracking obligations. We conducted a data reliability assessment of
VA's fiscal year 2015 obligation data that we used, which included
checks for missing values and outliers, and interviewed officials from
the Office of Finance within the Veterans Health Administration, who
are knowledgeable about the data. As a result of these steps, we
determined that the data were sufficiently reliable for our objectives.
We obtained the views of VA officials on the information provided in
this statement and incorporated their comments, as appropriate.
The work upon which this statement is based is being conducted in
accordance with generally accepted government auditing standards.
Background
VA provides medical services to various veteran populations-
including an aging veteran population and a growing number of younger
veterans returning from the military operations in Afghanistan and
Iraq. VA operates approximately 170 VAMCs, 130 nursing homes, and 1,000
outpatient sites of care. In general, veterans must enroll in VA health
care to receive VA's medical benefits package-a set of services that
includes a full range of hospital and outpatient services, prescription
drugs, and long-term care services provided in veterans' own homes and
in other locations in the community.
The majority of veterans enrolled in the VA health care system
receive care in VAMCs and community-based outpatient clinics, but VA
may authorize care through community providers to meet the needs of the
veterans it serves. For example, VA may provide care through its Care
in the Community (CIC) program, such as when a VA facility is unable to
provide certain specialty care services, like cardiology or
orthopedics. \6\ CIC services must generally be authorized by a VAMC
provider prior to a veteran receiving care. In addition to the CIC
program, VA may also provide care to veterans through the Veterans
Choice Program, which was established through the Veterans Access,
Choice, and Accountability Act of 2014 (Choice Act), enacted on August
7, 2014. \7\ Implemented in fiscal year 2015, the program generally
provides veterans with access to care by non-VA providers when a VA
facility cannot provide an appointment within 30 days or when veterans
reside more than 40 miles from the nearest VA facility. The Veterans
Choice Program is primarily administered using contractors, who, among
other things, are responsible for establishing nationwide provider
networks and scheduling appointments for veterans. The Choice Act
created a separate account known as the Veterans Choice Fund, which
cannot be used to pay for VA obligations incurred for any other
program, such as CIC, without legislative action. \8\ The Choice Act
appropriated $10 billion to be deposited in the Veterans Choice Fund.
Amounts deposited in the Veterans Choice Fund are available until
expended and are available for activities authorized under the Veterans
Choice Program. However, the Veterans Choice Program activities are
only authorized through fiscal year 2017 or until the funds in the
Veterans Choice Fund are exhausted, whichever occurs first. \9\
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\6\ VA has purchased health care services from community providers
since as early as 1945. Before 2015, VA referred to its CIC program as
``non-VA medical care'' or ``fee basis care.''
\7\ Pub. L. No.113-146, 128 Stat. 1754 (2014).
\8\ Pub. L. No.113-146, Sec. 802, 128 Stat. 1754, 1802-1803
(2014). It was outside the scope of our ongoing review to evaluate VA's
determinations to authorize an episode of care by non-VA providers
under the Veterans Choice Program as opposed to CIC.
\9\ Pub. L. No.113-146, Sec. 802(d), 128 Stat. 1754, 1802 (2014).
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As part of the President's request for funding to provide medical
services to veterans, VA develops an annual budget estimate detailing
the amount of services it expects to provide as well as the estimated
cost of providing those services. VA uses the Enrollee Health Care
Projection Model (EHCPM) to develop most of the agency's estimates of
the budgetary needs to meet the expected demand for VA medical
services. \10\ Like many other agencies, VA begins to develop these
estimates approximately 18 months before the start of the fiscal year
for which funds are provided. Different from many agencies, VA's
Veterans Health Administration receives advance appropriations for
health care in addition to annual appropriations. VA's EHCPM makes
these projections 3 or 4 years into the future for budget purposes
based on data from the most recent fiscal year. In 2012, for example,
VA used actual fiscal year 2011 data to develop the budget estimate for
fiscal year 2014 and the advance appropriation estimate for fiscal year
2015. Similarly, in 2013, VA used actual fiscal year 2012 data to
update the budget estimate for fiscal year 2015 and develop the advance
appropriation estimate for fiscal year 2016. Given this process, VA's
budget estimates are prepared in the context of uncertainties about the
future-not only about program needs, but also about future economic
conditions, presidential policies, and congressional actions that may
affect the funding needs in the year for which the estimate is made-
which is similar to budgeting practices of other federal agencies.
Further, VA's budget estimates are typically revised during the budget
formulation process to incorporate legislative and department
priorities as well as in response to successively higher level of
reviews in VA and OMB.
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\10\ The EHCPM's estimates are based on three basic components: the
projected number of veterans who will be enrolled in VA health care,
the projected quantity of health care services enrollees are expected
to use, and the projected unit cost of providing these services. Unit
costs are the costs to VA of providing a unit of service, such as a 30-
day supply of a prescription or a day of care at a medical facility.
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Each year, Congress provides funding for VA health care primarily
through the following appropriation accounts:
Medical Services, which funds, among other things, health
care services provided to eligible veterans and beneficiaries in VA's
medical centers, outpatient clinic facilities, contract hospitals,
state homes, and outpatient programs on a fee basis. \11\ The CIC
program is funded through this appropriation account.
---------------------------------------------------------------------------
\11\ In this statement, when we refer to medical services provided
by VA, we are referring only to the services funded through its Medical
Services appropriation account, which is where VA projected its fiscal
year 2015 funding gap.
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Medical Support and Compliance, which funds, among other
things, the administration of the medical, hospital, nursing home,
domiciliary, construction, supply, and research activities authorized
under VA's health care system.
Medical Facilities, which funds, among other things, the
operation and maintenance of the Veterans Health Administration's
capital infrastructure, such as costs associated with nonrecurring
maintenance, utilities, facility repair, laundry services, and
groundskeeping. \12\
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\12\ Nonrecurring maintenance is designed to correct, replace,
upgrade, and modernize existing infrastructure and utility systems.

Higher-than-Expected Obligations for the CIC Program and Hepatitis C
---------------------------------------------------------------------------
Drugs Accounted for VA's Fiscal Year 2015 Projected Funding Gap

Higher-than-Expected Obligations for the CIC Program Accounted for
85 Percent of VA's Projected Fiscal Year 2015 Funding Gap

Our preliminary work suggests that the higher-than-expected
obligations identified by VA in April 2015 for VA's CIC program
accounted for $2.34 billion (or 85 percent) of VA's projected funding
gap of $2.75 billion in fiscal year 2015. \13\ These higher-than-
expected obligations for the CIC program were driven by an increase in
utilization of VA medical services across VA, reflecting, in part, VA's
efforts to improve access to care after public disclosure of long wait
times at VAMCs. VA officials expected that the Veterans Choice Program
would absorb much of the increased demand from veterans for health care
services delivered by non-VA providers. However, veterans' utilization
of Veterans Choice Program services was much lower than expected in
fiscal year 2015. VA had estimated that obligations for the Veterans
Choice Program in fiscal year 2015 would be $3.2 billion, but actual
obligations totaled only $413 million. Instead, VA provided a greater
amount of services through the CIC program, resulting in total
obligations of $10.1 billion, which VA officials stated were much
higher than expected for that program in fiscal year 2015. \14\
According to VA officials, the lower-than-expected utilization of the
Veterans Choice Program in fiscal year 2015 was due, in part, to
administrative weaknesses, such as provider networks that had not been
fully established, that slowed enrollment in the program and that VAMC
staff lacked guidance on when to refer veterans to the program.
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\13\ At the end of the fiscal year, VA determined that the
projected funding gap was lower than it had initially projected,
because VA reduced or halted funding for non-essential projects to
mitigate an initial $3 billion projection.
\14\ The total obligations of $10.1 billion in fiscal year 2015 for
the CIC program do not include the $413 million in obligations for the
Veterans Choice Program in that year.
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The unexpected increase in CIC obligations in fiscal year 2015
exposed weaknesses in VA's ability to estimate costs for CIC services
and track associated obligations. While VA officials first became
concerned that CIC obligations might be significantly higher than
projected in January 2015, they did not determine that VA faced a
projected funding gap until April 2015-6 months into the fiscal year.
They made this determination after they compared authorizations in the
Fee Basis Claims System (FBCS)-VA's system for recording CIC
authorizations and estimating costs for this care-with obligations in
the Financial Management System (FMS)-the centralized financial
management system VA uses to track all of its obligations, including
those for medical services. In its 2015 Agency Financial Report (AFR),
VA's independent public auditor identified the following issues as
contributing to a material weakness in estimating costs for CIC
services and tracking CIC obligations: \15\
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\15\ See VA, 2015 Agency Financial Report (Washington, D.C.: Nov.
16, 2015).
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VAMCs individually estimate costs for each CIC
authorization and record these estimates in FBCS. This approach leads
to inconsistencies, because each VAMC may use different methodologies
to estimate the costs they record. \16\ Having more accurate cost
estimates for CIC authorizations is important to help ensure that VA is
aware of the amount of money it must obligate for CIC services.
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\16\ A recent VA Office of Inspector General report found that the
methods used to calculate estimated costs included Medicare rates,
historical costs, and an optional cost estimation tool provided by the
Chief Business Office within the Veterans Health Administration. This
office is responsible for developing administrative processes, policy,
regulations, and directives associated with the CIC program. The
accuracy of estimates varied widely among these methodologies. See VA
Office of Inspector General, Audit of the Veterans Health
Administration's Non-VA Medical Care Obligations (Washington, D.C.:
Jan. 12, 2015).
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VAMCs do not consistently adjust estimated costs
associated with authorizations for CIC services in a timely manner to
ensure greater accuracy, and they do not perform a ``look-back''
analysis of historical obligations to validate the reasonableness of
estimated costs. Furthermore, centralized, consolidated, and consistent
monitoring of CIC authorizations is not performed.
FBCS is not fully integrated with VA's systems for
recording and tracking the department's obligations. Notably, the
estimated costs of CIC authorizations recorded in FBCS are not
automatically transmitted to VA's Integrated Funds Distribution,
Control Point Activity, Accounting, and Procurement (IFCAP) system, a
procurement and accounting system used to send budgetary information,
such as obligations, to FMS. According to VA officials, because FBCS
and IFCAP are not integrated, at the beginning of each month, VAMC
staff must record in IFCAP estimated obligations for outpatient CIC
services, and they use historical obligations for this purpose. \17\
Depending on the VAMC, these estimated obligations may be entered as a
single lump sum covering all outpatient care or as separate estimated
obligations for each category of outpatient care, such as radiology.
Regardless of how they are recorded, the estimated obligations recorded
in IFCAP are often inconsistent with the estimated costs of CIC
authorizations recorded in FBCS. In fiscal year 2015, the estimated
obligations that VAMCs recorded in IFCAP were significantly lower than
the estimated costs of outpatient CIC authorizations recorded in FBCS.
VA officials told us that they did not determine a projected funding
gap until April 2015, because they did not complete their analysis of
comparing estimated obligations with estimated costs until then.
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\17\ In contrast, obligations corresponding to inpatient CIC
authorizations are automatically recorded into IFCAP when the
authorization is entered into FBCS. Officials told us that the high
volume of outpatient CIC authorizations compared to the relatively
lower volume of inpatient CIC authorizations, among other issues, makes
it impossible to automate the process for recording outpatient CIC
obligations using the existing systems.
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In addition, the Chief Business Office (CBO) within the Veterans
Health Administration, which is responsible for developing
administrative processes, policy, regulations, and directives
associated with the CIC program, had not developed and implemented
standardized and comprehensive policies for VAMCs, regional networks,
and the office itself to follow when estimating costs for CIC
authorizations and for monitoring authorizations and associated
obligations. \18\ This contributed to the material weaknesses the
independent public auditor identified in the AFR. The AFR and VA
officials we interviewed stated that because CIC was consolidated under
CBO in fiscal year 2015 pursuant to the Choice Act, CBO did not have
adequate time to implement efficient and effective procedures for
monitoring CIC obligations.
---------------------------------------------------------------------------
\18\ VA's regional networks manage VAMCs within their network.
---------------------------------------------------------------------------
To address the fiscal year 2015 projected funding gap, on July 31,
2015, VA obtained temporary authority to use up to $3.3 billion in
Veterans Choice Program funds for obligations incurred for medical
services from non-VA providers, whether authorized under the Veterans
Choice Program or CIC, starting May 1, 2015 and ending October 1, 2015.
\19\ Based on our preliminary work, Table 1 shows the sequence of
events that led to VA's request for and approval of additional budget
authority for fiscal year 2015.
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\19\ Of this amount, not more than $500 million could be used to
pay for drug expenses relating to the treatment of hepatitis C. Pub. L.
No. 114-41, Sec. 4004, 129 Stat. 443, 463 (2015).

Table 1: Timeline of Actions Taken to Address the Department of Veterans Affairs' (VA) Higher-than-Expected
Obligations for Care in the Community (CIC) Program in Fiscal Year 2015
----------------------------------------------------------------------------------------------------------------
Date Action taken
----------------------------------------------------------------------------------------------------------------
January 2015 VA officials stated that they first became concerned that
CIC obligations might be significantly higher than
projected. Officials discovered that authorizations for
CIC, which are recorded in the Fee Basis Claims System
(FBCS), had increased between 30 and 40 percent compared
to the same period in the prior year, while obligations
recorded in the Integrated Funds Distribution, Control
Point Activity, Accounting, and Procurement (IFCAP)
system and transmitted to the Financial Management System
(FMS) had not increased correspondingly. (a)
January - April 2015 VA officials told us that, upon discovering the
discrepancy between authorizations and obligations, VA
undertook efforts to determine the cause of the
discrepancy by comparing its authorizations in FBCS with
obligations in FMS. VA officials stated that this process
involved analyzing millions of transactions and was
complicated by the lack of interoperability between FBCS
and FMS.
April 2015 VA officials determined that CIC obligations were
underreported in FMS, were projected to exceed the
program's budgetary resources as currently allotted, and
estimated this would result in a projected funding gap.
(b)
May 2015 VA explored whether it had other budgetary resources
available to address its projected funding gap and
reduced or halted funding for non-essential projects.
May - June 2015 Officials stated that VA asked the Office of Management
and Budget whether unobligated balances from prior years
in other appropriation accounts could be used to address
the projected funding gap. VA was informed that this was
not possible.
June 2015 VA notified the Senate and House Committees on Veterans
Affairs of its projected funding gap of about $3 billion-
of which it attributed $2.5 billion to its CIC program-
and requested temporary authority to use Veterans Choice
Program funds for other purposes, specifically to cover
the projected funding gap in VA's medical services
appropriation account. (c)
July 2015 VA obtained temporary authority to use up to $3.3 billion
in Veterans Choice Program funding to cover the projected
funding gap.
September 30, 2015 At the end of the fiscal year, VA determined that its
projected funding gap was $2.75 billion-of which VA
attributed $2.34 billion to its CIC program. This amount
was lower than VA had initially projected, because VA
reduced or halted funding for non-essential projects.
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis based on VA documentation and interviews. ? GAO-16-374T.
(a) VA medical centers (VAMC) use FBCS to record CIC authorizations and estimate costs for this care. IFCAP is a
decentralized procurement, funds control, and front-end accounting system. IFCAP transmits obligations to VA's
FMS. VA uses FMS to track all of its obligations, including those for medical services.
(b) According to VA officials, VAMCs record obligations for outpatient CIC in IFCAP monthly, using historical
obligations in each category of care, such as radiology. In contrast, obligations associated with inpatient
CIC are automatically transmitted to IFCAP at the time the care is authorized in FBCS.
(c) In June 2015, VA officials provided the House Committee on Veterans Affairs with a spreadsheet outlining its
expected obligations for CIC through the end of fiscal year 2015 compared to the amount budgeted for CIC at
the beginning of the fiscal year. The amount budgeted for CIC, as reported to the committee, did not match the
amount allocated for CIC in VA's budget justification, which was presented to Congress as part of the
President's budget request in February 2015. VA officials told us that the amounts did not match because VA
had made changes in how it defined its CIC program between the time the budget justification was developed and
the beginning of fiscal year 2015, including reorganizing certain programs as a result of the Veterans Access,
Choice, and Accountability Act of 2014 under the Chief Business Office, which is responsible for developing
administrative processes, policy, regulations, and directives associated with the CIC program. VA officials
were unable to fully reconcile the difference between the two amounts.

Unanticipated Obligations for Hepatitis C Drugs Contributed to the
Remaining Portion of VA's Projected Fiscal Year 2015 Funding Gap

Our preliminary work also suggests that unexpected obligations for
new hepatitis C drugs accounted for $0.41 billion of VA's projected
funding gap of $2.75 billion in fiscal year 2015. \20\ Although VA
estimated that obligations in this category would be $0.7 billion that
year, actual obligations totaled about $1.2 billion.
---------------------------------------------------------------------------
\20\ In addition, VA faced unanticipated construction costs
totaling $875 million for the new Aurora, Colorado VAMC. VA
reprogrammed funds in its medical services account, and with statutory
authority, transferred funds from other VA appropriation accounts to
cover these unanticipated construction costs.
---------------------------------------------------------------------------
VA officials told us that VA did not anticipate in its budget the
obligations for new hepatitis C drugs -which help cure the disease-
because the drugs were not approved by the Food and Drug Administration
until fiscal year 2014, after VA had already developed its budget
estimate for fiscal year 2015. The new drugs costs between $25,000 and
$124,000 per treatment regimen, and according to VA officials demand
for the treatment was high. \21\ Officials told us that about 30,000
veterans received these drugs in fiscal year 2015.
---------------------------------------------------------------------------
\21\ VA officials told us that they were not aware of the cost of
these drugs until after their approval.
---------------------------------------------------------------------------
In October 2014, VA reprogrammed $0.7 billion within its medical
services appropriation account to cover projected obligations for the
new hepatitis C drugs, after VA became aware of the drugs' approval.
However, in January 2015, VA officials recognized that obligations for
the new hepatitis C drugs would be significantly higher by year end
than they expected. VA officials told us that they assessed next steps
and then limited access to the drugs to those veterans with the most
severe cases of hepatitis C. In June 2015, VA requested statutory
authority to transfer funds dedicated to the Veterans Choice Program to
VA's medical services appropriation account to cover the projected
funding gap.

VA has Taken Steps to Better Track Obligations and Project Health Care
Utilization, but Systems Deficiencies and Budgeting Uncertainties
Remain

VA Has Taken Steps to Better Track Obligations, but Deficiencies
Remain in the Systems for Tracking Obligations
Our preliminary work indicates that VA has developed new processes
to prevent funding gaps for fiscal year 2016 and future years by
improving its ability to track obligations for CIC services and
hepatitis C drugs.
In August 2015, VA issued a standard operating procedure
to all VAMCs for recording estimated costs for inpatient and outpatient
CIC in FBCS. The procedure, among other things, stipulates that VAMCs
are to base estimated costs on historical cost data provided by VA. In
addition, VA developed a software patch-released in December 2015 to
all VAMCs-that automatically generates estimated costs for CIC
authorizations, thereby eliminating the need for VAMC staff to
individually estimate costs and record them in FBCS. According to VA
officials, these changes should result in more accurate estimated costs
for CIC authorizations. However, VA officials told us that accurately
estimating the cost of CIC authorizations is challenging because of
several unknown factors, such as the number of times a veteran may seek
treatment for a recurring condition. \22\
---------------------------------------------------------------------------
\22\ A single authorization may allow for multiple episodes of
care, such as up to 10 visits to a physical therapist. Alternatively, a
veteran may choose not to seek the care that was authorized.
---------------------------------------------------------------------------
In November 2015, VA allocated funds for CIC and
hepatitis C drugs to each VAMC. \23\ In addition, VA officials told us
that to identify VAMCs that may be at risk for exhausting their funds
before the end of the fiscal year, VA began tracking VAMCs' obligations
for CIC and hepatitis C drugs through monthly reports. Officials from
the Office of Finance within the Veterans Health Administration told us
that once a VAMC had obligated its CIC and hepatitis C drug funds, it
would have to request additional funds from VA. VA would, in turn,
evaluate the validity of a VAMC's request and determine whether
additional funds may be made available. This practice could limit
veterans' access to CIC services or hepatitis C drugs in some
locations. Officials told us that these steps are intended to reduce
the risk of VAMCs obligating more funds than VA's budgetary resources
allow.
---------------------------------------------------------------------------
\23\ VA officials told us that, after VA received its fiscal year
2016 appropriations in December 2015, VA increased the funds allocated
to VAMCs.
---------------------------------------------------------------------------
In November 2015, VA also issued a policy requiring VAMCs
to identify and report on potentially inaccurate estimated costs for
CIC authorizations recorded in FBCS and any discrepancies between
estimated costs for CIC authorizations recorded in FBCS and the amount
of estimated obligations recorded in FMS. According to VA officials,
these discrepancies may signal a risk of VA under obligating funds for
CIC, leaving VA potentially unable to pay for authorized care. VA's
policy also requires VAMCs to address concerns identified by VAMCs in
these reports-such as adjusting unreasonably low estimated costs for
CIC authorizations and unreasonably low estimated obligations, to make
the estimates more accurate. Under VA's new policy, network directors
are required to certify monthly that the reports have been reviewed and
concerns addressed.
VA officials told us that these new processes are necessary to help
prevent future funding gaps because of the deficiencies in VA's systems
for tracking obligations, which we have described previously.
Officials also told us that VA is exploring options for replacing
IFCAP and FMS, which officials describe as antiquated systems based on
outdated technology, and the department has developed a rough timeline
and estimate of budgetary needs to make these changes. Officials told
us that the timeline and cost estimate would be refined once concrete
plans for replacing IFCAP and FMS are developed. Officials told us that
replacing IFCAP and FMS is challenging due to the scope of the project
and the requirement that the replacement system interface with various
VA legacy systems, such as the Veterans Health Information Systems and
Technology Architecture, VA's system containing veterans' electronic
health records. However, as we have previously reported, VA has made
previous attempts to update IFCAP and FMS that were unsuccessful. In
October 2009, we attributed these failures to the lack of a reliable
implementation schedule and cost estimates, among other factors, and
made several recommendations aimed at improving program management.
\24\
---------------------------------------------------------------------------
\24\ Previous unsuccessful attempts to update FMS include the Core
Financial and Logistics System in 2004. See GAO, Information
Technology: Actions Needed to Fully Establish Program Management
Capability for VA's Financial and Logistics Initiative, GAO 10 40
(Washington, D.C.: Oct. 26, 2009).

VA is Using More Recent Data to More Accurately Project Future Health
---------------------------------------------------------------------------
Care Utilization, but Budgetary Uncertainties Remain

Our preliminary work indicates that VA updated its EHCPM to include
data from the first 6 months of fiscal year 2015, reflecting increased
health care utilization in that year, which VA officials told us will
inform VA's budget estimate for fiscal year 2017 and advance
appropriations request for fiscal year 2018. \25\ Without this change,
VA would have used actual data from fiscal year 2014 to make its budget
estimate and inform the President's budget request for fiscal years
2017 and 2018.
---------------------------------------------------------------------------
\25\ The President's Budget request for fiscal year 2016 and VA's
fiscal year 2016 congressional budget justification had been submitted
by the time officials realized that VA faced a projected funding gap
for its medical services appropriation account in fiscal year 2015.
---------------------------------------------------------------------------
However, as we have previously reported, while the EHCPM projection
informs most of VA's budget estimate, the amount of the estimate is
determined by several factors, including the President's priorities.
Historically, the final budget estimate for VA has consistently been
lower than the amount projected for modeled services. VA officials told
us that they expect any difference between the fiscal year 2017 budget
estimate and the amount projected by VA's model to be made up by
greater utilization of the Veterans Choice Program. However, VA's
authority to use Veterans Choice Program funds is only available
through fiscal year 2017 or until the funds are exhausted, whichever
occurs first.
VA has also taken steps to help increase utilization of the
Veterans Choice Program. VA issued policy memoranda to VAMCs in May and
October 2015, requiring them to refer veterans to the program if timely
care cannot be delivered by a VAMC, rather than authorizing care
through the CIC program. With statutory authority, VA has also loosened
restrictions on veterans' use of the Veterans Choice Program,
eliminating the requirement that veterans must be enrolled in the VA
health care system by August 2014 in order to receive care through the
program. \26\ While data from November 2015 indicate that utilization
of care under the Veterans Choice Program has increased, VA officials
expressed concerns that utilization would not reach the levels
projected for fiscal year 2016 because of continuing weaknesses in
implementing the program. For example, in November 2015, VA's Office of
Compliance and Business Integrity identified extensive noncompliance
among VAMCs with VA's policies for implementing the Veterans Choice
Program and recommended training for VAMC staff responsible for
implementing the program. \27\ The office also recommended that VA
establish internal controls to ensure compliance with VA's policies. As
of January 2016, VA had not completed a plan for establishing these
internal controls.
---------------------------------------------------------------------------
\26\ Pub. L. No. 114-41, Sec. 4005(b), 129 Stat. 443, 464 (2015).
\27\ This office provides internal oversight of the VAMCs' revenue
and CIC operations.
---------------------------------------------------------------------------
Like other health care payers, VA faces uncertainties estimating
the cost of emerging health care treatments-such as costly drugs to
treat chronic diseases affecting veterans. VA, like other federal
agencies, prepares its budget estimate 18 months in advance of the
start of the fiscal year for which funds are provided. At the time VA
develops its budget estimate, it may not have enough information to
estimate the likely costs for health care services or these treatments
with reasonable accuracy. However, by establishing appropriate internal
controls, VA can help reduce the risks associated with the weaknesses
in its budgetary projections and monitoring.
Chairman Miller, Ranking Member Brown, and Members of the
Committee, this concludes my statement for the record.

GAO Contacts & Staff Acknowledgments

If you or your staff members have any questions concerning this
statement, please contact Randall B. Williamson, Director, Health Care,
at 202-512-7114 or williamsonr@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this statement. GAO staff who made key contributions to this
statement include Rashmi Agarwal, Assistant Director; Luke Baron;
Krister Friday; Jacquelyn Hamilton; and Michael Zose.

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GAO Highlights
Highlights of GAO-16-374T, a statement for the record to the
Committee on Veterans Affairs, House of Representatives

Why GAO Did This Study

VA projected a funding gap in its fiscal year 2015 medical services
appropriation account and obtained temporary authority to use up to
$3.3 billion in Veterans Choice Program funding to close this gap. GAO
was asked to examine VA's fiscal year 2015 projected funding gap and
changes VA has made to help prevent potential funding gaps in future
years.
This statement is based on GAO's ongoing work and provides
preliminary observations on (1) the activities or programs that
accounted for VA's fiscal year 2015 projected funding gap in its
medical services appropriation account and (2) changes VA has made to
prevent potential funding gaps in future years. GAO reviewed data VA
provided on its obligations and related documents to determine what
activities accounted for the projected funding gap in its fiscal year
2015 medical services appropriation account, as well as the factors
that contributed to the projected funding gap. GAO interviewed VA and
Office of Management and Budget officials to identify the steps taken
to address the projected funding gap. GAO also examined changes VA made
to better track obligations and project future budgetary needs.
GAO shared the information provided in this statement with VA and
incorporated its comments as appropriate.

VA'S HEALTH CARE BUDGET
Preliminary Observations on Efforts to Improve Tracking of Obligations
and Projected Utilization
What GAO Found

GAO's ongoing work indicates that two areas accounted for the
Department of Veterans Affairs' (VA) fiscal year 2015 projected funding
gap of $2.75 billion. Specifically,

Higher-than-expected obligations for VA's longstanding
care in the community (CIC) program-which allows veterans to obtain
care from providers outside of VA facilities-accounted for $2.34
billion or 85 percent of VA's projected funding gap. VA officials
expected that the new Veterans Choice Program-which was implemented in
fiscal year 2015 and also allows veterans to access care from non-VA
providers under certain conditions-would absorb veterans' increased
demand for care after public disclosure of long wait times. However,
administrative weaknesses slowed enrollment into this new program. The
unexpected increase in CIC obligations also exposed VA's weaknesses in
estimating costs for CIC services and tracking associated obligations.
VA officials did not determine that VA faced a projected funding gap
until April 2015-6 months into the fiscal year, after they compared
estimated authorizations with estimated obligations for CIC.
Unanticipated obligations for hepatitis C drugs accounted
for the remaining portion-$408 million-of VA's projected funding gap.
VA did not anticipate in its budget the obligations for these costly,
new drugs, which can help cure the disease, because the drugs did not
gain approval from the Food and Drug Administration until fiscal year
2014-after VA had already developed its budget estimate for fiscal year
2015. VA officials told GAO that in fiscal year 2015 about 30,000
veterans received these drugs, which cost between $25,000 and $124,000
per treatment regimen.

GAO's ongoing work indicates that VA has taken steps to better
track obligations and project future healthcare utilization, but
systems deficiencies and budgetary uncertainties remain. Specifically,
GAO's preliminary results indicate that VA has taken the following
steps:

VA issued a standard operating procedure to help VA
medical centers (VAMC) more accurately estimate the costs associated
with authorizations for CIC.
VA directed VAMCs to compare their estimated costs for
CIC authorizations with estimated obligations for CIC on a monthly
basis.
VA allocated funds to each VAMC for CIC and hepatitis C
drugs and began tracking VAMCs' obligations with monthly reports.
Officials told GAO that once a VAMC has obligated its funds, it would
have to request additional funds. VA would determine whether additional
funds may be made available. These processes are necessary because
continued deficiencies in VA's financial systems present challenges in
tracking of obligations.
VA updated the model it uses to inform most of its budget
estimates for medical services. It now includes more recent data that
reflect increased healthcare utilization among veterans in fiscal year
2015. However, VA officials noted uncertainties remain about the
forecasted utilization of the Veterans Choice Program and emerging
health care treatments, which could affect the accuracy of the health
care budget estimates.

THE INDEPENDENT BUDGET
Budget Recommendations for FY 2017 and FY 2018

Introduction

For 30 years, the co-authors of The Independent Budget-DAV
(Disabled American Veterans), Paralyzed Veterans of America (PVA), and
Veterans of Foreign Wars (VFW)-have presented our budget and policy
recommendations to Congress and the Administration. Our recommendations
are meant to inform Congress and the Administration of the needs of our
members and all veterans and to offer substantive solutions to address
the many health care and benefits challenges they face. This budget
report serves as our benchmark for properly funding the Department of
Veterans Affairs (VA) to ensure the delivery of timely, quality health
care and accurate and appropriate benefits.
The Independent Budget veterans' service organizations (IBVSOs)
recognize that Congress and the Administration continue to face immense
pressure to reduce federal spending. However, we believe that the ever-
growing demand for health care and benefits services provided by the VA
certainly validates the continued need for sufficient funding. We
understand that VA has fared better than most federal agencies in
budget proposals and appropriations.
In the past couple of years, as many federal agencies have faced
reductions in funding, the Administration has continued to request
increases to discretionary funding for VA. At the same time, Congress
has continued to provide increases in appropriations dollars. However,
the serious access problems in the health care system identified in
2014 and the continued pressure being placed on the claims processing
system raise serious questions about the resources being provided and
how VA chooses to spend these resources. In fact, Deputy Secretary
Gibson affirmed on multiple occasions that for too long VA has been
``managing to budget, not to need.'' This is an unacceptable practice
for an agency charged with meeting the needs of veterans who have
served and sacrificed.
The IBVSOs are jointly releasing this stand-alone report that
focuses solely on the budget of VA and our projections for the VA's
funding needs across all programs. This report is not meant to suggest
that these are the absolute correct answers for funding these services.
However, in submitting our recommendations the IBVSOs are attempting to
produce an honest assessment of need that is not subject to the
politics of federal budget development and negotiations that inevitably
have led to continuous funding deficits.
Our recommendations include funding for all discretionary programs
for FY 2017 as well as advance appropriations recommendations for
medical care accounts for FY 2018. Our recommendations reflect our
concerns with obtaining adequate funding levels for the VA in light of
the massive shortfall that the VA faced last summer. It affirms the
need for added emphasis on properly staffing the health care system and
building capacity, particularly in the spinal cord injury system of
care that serves the largest single inpatient population of veterans.
We hope that the House and Senate Committees on Veterans' Affairs as
well as the Military Construction and Veterans' Affairs Appropriations
Subcommittees will be guided by these estimates in making their
decisions to ensure sufficient, timely, and predictable funding for VA.

VA Accounts for FY 2017 and FY 2018 Advance Appropriations
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2017 FY 2018 FY 2018
FY 2016 Advance FY 2017 Admin FY 2017 IB Advance Advance
Appropriation Approps Revised Approps Approps
--------------------------------------------------------------------------------------------------------------------------------------------------------
Veterans Health Administration (VHA)
Medical Services 49,972,360 51,673,000 45,505,812 60,868,757 44,886,554 64,032,909
Medical Community Care 7,246,181 9,409,118
Choice Program** 5,643,953 5,673,190
Subtotal Medical Services 55,616,313 51,673,000 58,425,183 60,868,757 54,295,672 64,032,909
Medical Support and Compliance 6,144,000 6,524,000 6,524,000 6,222,894 6,654,480 6,314,266
Medical Facilities 5,020,132 5,074,000 5,723,000 5,742,036 5,434,880 6,683,603
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subtotal Medical Care, Discretionary 66,780,445 63,271,000 70,672,183 72,833,687 66,385,032 77,030,778
--------------------------------------------------------------------------------------------------------------------------------------------------------

Medical Care Collections 3,515,171 3,299,954 3,558,307 3,627,255
--------------------------------------------------------------------------------------------------------------------------------------------------------

Total, Medical Care Budget Authority (including 70,295,616 66,570,954 74,230,490 72,833,687 70,012,287 77,030,778
Collections)
--------------------------------------------------------------------------------------------------------------------------------------------------------

Medical and Prosthetic Research 630,735 663,366 665,000
Millions Veterans Program 75,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

Total, Veterans Health Administration 70,926,351 66,570,954 74,893,856 73,573,687
--------------------------------------------------------------------------------------------------------------------------------------------------------

General Operating Expenses (GOE)
Veterans Benefits Administration 2,707,734 2,826,160 3,056,353
General Administration 336,659 417,959 345,623
Board of Veterans Appeals 109,884 156,096 134,150
Total, GOE 3,154,277 3,400,215 3,536,126
--------------------------------------------------------------------------------------------------------------------------------------------------------

Departmental Admin/ Misc. Programs
Information Technology 4,133,363 4,278,259 4,209,053
National Cemetery Administration 271,220 286,193 274,942
Office of Inspector General 136,766 160,106 138,440
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, Dept. Admin/ Misc. Programs 4,541,349 4,724,558 4,622,435
--------------------------------------------------------------------------------------------------------------------------------------------------------

Construction Programs
Construction, Major 1,243,800 528,110 1,500,000
Construction, Minor 406,200 372,069 749,000
Grants for State Extended Care Facilities 120,000 80,000 200,000
Grants for State Vets Cemeteries 46,000 45,000 52,000
Total, Construction Programs 1,816,000 1,025,179 2,501,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

Other Discretionary 166,090 201,000 168,000
Rescission to Joint Incentive Fund -30,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

Total, Discretionary Budget Authority (Including Medical 80,574,067 84,244,808 84,401,248
Collections)
--------------------------------------------------------------------------------------------------------------------------------------------------------

Veterans Health Administration
Total Medical Care
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
FY 2017 IB Recommendation $72.8 billion
FY 2017 Enacted Advance Appropriations $63.3 billion
Medical Care Collections $3.3 billion
Total Advance Appropriations $66.6 billion
FY 2017 Revised Administration Request
**This amount includes approximately $3.6 billion in Medical Care
Collections and nearly $5.6 billion in funding used under
authorities of the Choice Act.
Total $74.2 billion
FY 2018 IB Advance Appropriations Recommendation $77.0 billion
FY 2018 Administration Advance Appropriations Request $70.0 billion
Medical Care Collections $3.6 billion
Total $73.6 billion
----------------------------------------------------------------------------------------------------------------

The IBVSOs appreciate the fact that the Administration continues to
present budget recommendations for the overall Medical Care accounts
that address veterans' growing demand for health care services.
Unfortunately, we believe the FY 2017 advance appropriation approved by
Congress in the FY 2016 Consolidated and Further Continuing
Appropriations Act is not sufficient to meet the full demand for
services being placed on the system. For FY 2017, the IB recommends
approximately $72.8 billion in total medical care funding. Congress
recently approved only $66.6 billion for this account (including an
assumption of approximately $3.3 billion in medical care collections).
Of particular concern to the IBVSOs that VA continues to over-
project and underperform its medical care collections estimates.
Overestimating medical care collections allows Congress to appropriate
fewer discretionary dollars for the health care system. However, when
VA fails to collect what VA originally estimated, it is left with
insufficient funding to meet the actual demand by veterans. As long as
this scenario continues, VA will find itself falling farther behind in
its ability to care for enrolled veterans, the precise situation now
occurring.
Similarly, we are concerned that the baseline for FY 2016 was not
appropriately adjusted in the previous continuing appropriations bill
to offset the severe shortfall the VA experienced last year. The
underfunded baseline will assuredly have a serious negative downstream
effect on funding for FY 2017 and FY 2018. We believe that it will be
critical moving forward for VA to adjust its baseline for total Medical
Care need to account for the much greater demand for services.
With these thoughts in mind, The Independent Budget also recommends
approximately $77.0 billion for total Medical Care for FY 2018. This
recommendation reflects the necessary adjustment to the baseline for
all Medical Care program funding in the preceding fiscal years.

Medical Services
Appropriations for FY 2017
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
FY 2017 IB Recommendation $60.9 billion
FY 2017 Revised Administration Request
Medical Services $45.5 billion
Medical Community Care (New Proposed Account) $7.2 billion
Section 801 and 802 Choice Act Funds $5.7 billion
Medical Care Collections $3.6 billion
Total $58.4 billion
FY 2017 Enacted Advance Appropriations $51.7 billion
Medical Care Collections $3.6 billion
Total $55.3 billion
----------------------------------------------------------------------------------------------------------------

For FY 2017, The Independent Budget recommends $60.9 billion for
Medical Services. This recommendation is a reflection of multiple
components. These components include the following recommendations:

Current Services Estimate...........$57,114,044,000
Increase in Patient Workload...........$1,409,713,000
Additional Medical Care Program Cost........$2,345,000,000
Total FY 2016 Medical Services..........$60,868,757,000

The current services estimate reflects the impact of projected
uncontrollable inflation on the cost to provide services to veterans
currently using the system. This estimate also assumes a 1.2 percent
increase for pay and benefits across the board for all VA employees in
FY 2017. The Administration recently announced an intention to provide
a 1.6 percent comparability increase. The significant increase in our
recommended funding also reflects an adjustment in the baseline for
funding within the Medical Services account of approximately $2.85
billion. The Independent Budget believes this adjustment is necessary
in light of a more than $3 billion shortfall that the VA health care
system experienced last summer. The fact that VA provided 7 million
more appointments last year-both within VA facilities and in the
community-is further evidence of the dramatic rise in demand. If the
baseline from FY 2016 is not adjusted to better reflect the true demand
VA is experiencing, we believe the VA will inevitably face a severe
shortfall again this fiscal year and next.
Our estimate of growth in patient workload is based on a projected
increase of approximately 103,000 new unique patients. These patients
include priority group 1*-8 veterans and covered non-veterans. We
estimate the cost of these new unique patients to be approximately $1.2
billion. The increase in patient workload also includes a projected
increase of 53,150 new Operation Enduring Freedom and Operation Iraqi
Freedom (OEF/OIF) enrollees, as well as Operation New Dawn (OND)
veterans at a cost of approximately $215 million. The increase in
utilization among OEF/OIF/OND veterans is supported by the average
annual increase in new users through the third quarter of FY 2015.
The Independent Budget believes that there are additional projected
medical program funding needs for VA. Specifically, we believe there is
real funding needed to address the array of long-term-care issues
facing VA, including the shortfall in institutional capacity; critical
resources to address the continually increasing demand for life-saving
Hepatitis C treatments; to provide additional centralized prosthetics
funding (based on actual expenditures and projections from the VA's
Prosthetics and Sensory Aids Service); funding to expand and improve
services for women veterans; as well as funding necessary to improve
the Comprehensive Family Caregiver program. Similarly, VA must ensure
that adequate funding is directed towards specialized services, to
include the beds and staffing infrastructure for the spinal cord injury
service which delivers lifetime care for a patient population that
heavily relies on the VA health care system. Lack of commitment to
these programs threatens the health and well-being of many of the most
vulnerable populations of veterans.

Long-Term Services and Supports

The Independent Budget recommends $285 million for FY 2017. This
recommendation reflects the fact that there was a significant increase
in the number of veterans receiving Long Term Services and Supports
(LTSS) in 2015. Unfortunately, due to loss of authorities-specifically
fee-care no longer being authorized, provider agreement authority not
yet enacted, and the inability to use Choice funds for all but skilled
nursing care-to purchase appropriate LTSS care particularly for home-
and community-based care, we estimate an increase in the number of
veterans using the more costly long-stay and short-stay nursing home
care. This funding is particularly important to veterans with spinal
cord injury/disease (SCI/D), as they tend to rely on inpatient LTSS
that is far more complex than the average veteran. Unfortunately, SCI/D
veterans are significantly underserved by VA's LTSS. We believe the
Administration must demonstrate serious commitment to expanding
capacity for long-term care for veterans with SCI/D.

Hepatitis C

We also recommend $1.7 billion dedicated specifically to the goal
of expanding treatment for veterans diagnosed with Hepatitis C. The VA
previously projected a goal to treat 120,000 veterans with Hepatitis C
between FY 2016 and FY 2018. In, FY 2017, VA is expected to treat as
many as 50,000 veterans with a projected cost of approximately $1.7
billion. This estimate also includes the assumption of a 10 percent
cost reduction per veteran, which we believe the VA will be able to
achieve through the introduction of newer and cheaper Hepatitis C
medications, and if the VA renegotiates the price of current
medications.

Prosthetics and Sensory Aids

In order to meet the increase in demand for prosthetics, the IB
recommends an additional $150 million. This increase in prosthetics
funding reflects a similar increase in expenditures from FY 2015 to FY
2016 and the expected continued growth in expenditures for FY 2017.
With the development of new advanced prosthetics that will benefit
veterans with the most catastrophic disabilities, such as loss of
single or multiple limb functions, significant resources must be
provided to support this advancement. Failure to do so will limit the
options available to veterans with the greatest need.

Caregiver Support Program

Our increased program cost recommendation also includes $120
million (above the projected baseline of $605 million) for the
Comprehensive Family Caregiver Program in FY 2017. The additional $120
million for VA's Caregiver Program will provide for the steady rate of
increase in the number of caregivers participating in the program,
currently averaging between 350 and 400 per month. The amount
recommended will also provide for a more robust number of Caregiver
Support Coordinators to address issues regarding the program
administration at local facilities. This will directly benefit an aging
and severely disabled veteran population whose lives are significantly
impacted by the availability of comprehensive VA Caregiver Support
services.

Women Veterans

The Medical Services appropriation should be supplemented with $90
million designated for women's health care programs, in addition to
those amounts already included in the FY 2017 baseline. These funds
would be used to help the Veterans Health Administration deal with the
continuing growth in ensuring coverage for gynecological, prenatal, and
obstetric care, other gender-specific services, and for maintenance and
repair of facilities hosting women's care to improve privacy and safety
of these facilities. The new funds would also aid VHA in making its
cultural transformation to embrace women veterans and welcome them to
VA health care services, and provide means for VA to improve
specialized mental health and readjustment services for women veterans.

Spinal Cord Injury/Disease Care

The IBVSOs remain concern that adequate resources are not being
directed towards the VA's largest inpatient system of care. The Spinal
Cord Injury & Disease (SCI/D) continuum of care model for the lifetime
treatment of veterans with SCI/D has evolved over a period of more than
50 years. VA SCI/D care has been established in a unique ``Hub and
Spokes'' model. If SCI/D centers are underfunded, and thus
insufficiently staffed, spoke facilities (often secondary VA medical
centers) are forced to care for veterans in need of types of complex,
acute care that they are unprepared to provide. Like private sector
non-specialized care, care at spoke facilities is insufficient to treat
SCI/D-specific acute conditions (e.g. pressure ulcer debridement,
complex urinary tract infection) because the spokes are only equipped
to provide basic primary and preventative health care. Both Congress
and VA must work together to ensure all VA SCI/D Centers have the right
number of available operating beds and nurse staffing ratios to care
for referred veterans, and revisit annual reporting requirements to
measure capacity for VA SCI/D and other specialized care as previously
required by Public Law 104-262.

Advance Appropriations for FY 2018
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
FY 2018 IB Advance Appropriations Recommendation $64.0 billion
FY 2018 Administration Advance Appropriations Request
Medical Services $44.9 billion
Medical Community Care (New Proposed Account in FY17) $9.4 billion
Medical Care Collections $3.6 billion
Subtotal $57.9 billion
----------------------------------------------------------------------------------------------------------------

The Independent Budget once again offers baseline projections for
funding through advance appropriations for the Medical Care accounts
for FY 2018. While the enactment of advance appropriations for VA
medical care in 2009 helped to improve the predictability of funding
requested by the Administration and approved by Congress, we have
become increasingly concerned that sufficient corrections have not been
made in recent years to adjust for new, unexpected demand for care.
For FY 2018, The Independent Budget recommends approximately $64.0
billion for Medical Services. Our Medical Services level includes the
following recommendations:

Current Services Estimate............$61,011,026,000
Increase in Patient Workload............$1,351,883,000
Additional Medical Care Program Cost.......$1,670,000,000
Total FY 2017 Medical Services...........$64,032,909,000

Our estimate of growth in patient workload is based on a projected
increase of approximately 93,000 new patients. These new unique
patients include priority group 1*-8 veterans and covered nonveterans.
We estimate the cost of these new patients to be approximately $1.1
billion. This recommendation also reflects an assumption that more
veterans will be accessing the system as VA expands its capacity and
services and we believe that reliance rates will increase as veterans
examine their health care options as a part of the Choice program. The
increase in patient workload also assumes a projected increase of
49,500 new OEF/OIF and OND veterans, at a cost of approximately $207
million.
Last, as previously discussed, the IBVSOs believe that there are
additional medical program funding needs for VA. The Independent Budget
recommends $285 million directed toward VA long-term-care programs. In
order to continue to provide the critically needed Hepatitis C
treatments, we recommend $1 billion to treat 30,000 veterans. In order
to meet the increase in demand for prosthetics, the IB recommends an
additional $160 million. Our additional program cost recommendation
includes continued investment of $125 million in the Comprehensive
Family Caregiver program. Finally, we believe that VA should invest a
minimum of $100 million as an advance appropriation in FY 2018 to
expand and improve access to women veterans' health care programs.

Medical Support and Compliance

FY 2017 IB Recommendation $6.223 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Enacted Advance Appropriations $6.524 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Revised Administration Request $6.524 billion
----------------------------------------------------------------------------------------------------------------

FY 2018 IB Advance Appropriations Recommendation $6.314 billion
----------------------------------------------------------------------------------------------------------------
FY 2018 Administration Advance Appropriations Request $6.654 billion

For Medical Support and Compliance, The Independent Budget
recommends $6.2 billion for FY 2017. Our projected increase reflects
growth in current services based on the impact of inflation on the FY
2016 appropriated level. Additionally, for FY 2018 The Independent
Budget recommends $6.3 billion for Medical Support and Compliance. This
amount also reflects an increase in current services from the FY 2017
advance appropriations level.

Medical Facilities

FY 2017 IB Recommendation $5.742 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Enacted Advance Appropriations $5.074 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Revised Administration Request $5.723 billion
----------------------------------------------------------------------------------------------------------------

FY 2018 IB Advance Appropriations Recommendation $6.684 billion
----------------------------------------------------------------------------------------------------------------
FY 2018 Administration Advance Appropriations Request $5.435 billion

For Medical Facilities, The Independent Budget recommends $5.7
billion for FY 2017, nearly $700 million more than the enacted advance
appropriation from December 2015. Our Medical Facilities recommendation
includes $1.35 billion for Non-Recurring Maintenance (NRM). The
Administration's request over the past two budget cycles represented a
wholly inadequate level for NRM funding, particularly in light of the
actual expenditures that were outlined in the budget justification.
While VA has actually spent on average approximately $1.3 billion
yearly for NRM, the Administration has requested only $460 million for
NRM. This request level is clearly insufficient. This decision means
that VA is forced to divert funds programmed for other purposes to meet
this need. Additionally, our recommendation includes $692 million for
operating and capital leases.
The Independent Budget recommends approximately $6.7 billion for
Medical Facilities for FY 2018. Our FY 2018 advance appropriation
recommendation also includes $1.35 billion for NRM. Last year the
Administration's recommendation for NRM reflected a projection that
would place the long-term viability of the health care system in
serious jeopardy. This deficit must be addressed.

Medical and Prosthetic Research

FY 2017 IB Recommendation $665 million
----------------------------------------------------------------------------------------------------------------
Million Veteran Program $75 million
----------------------------------------------------------------------------------------------------------------
Total IB Medical and Prosthetic Research $740 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $631 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $663 million

The VA Medical and Prosthetic Research program is widely
acknowledged as a success on many levels, and contributes directly to
improved care for veterans and an elevated standard of care for all
Americans. The research program is an important tool in VA's
recruitment and retention of health care professionals and clinician-
scientists to serve our nation's veterans. By fostering a spirit of
research and innovation within the VA medical care system, the VA
research program ensures that our veterans are provided state-of-the-
art medical care.

Investing Taxpayers' Dollars Wisely

Despite documented success of VA investigators across many fields,
the amount of appropriated funding for VA research since FY 2010 has
lagged far behind annual biomedical research inflation rates, resulting
in a net loss over these years of nearly 10 percent of the program's
overall purchasing power. As estimated by the Department of Commerce,
Bureau of Economic Analysis, and the National Institutes of Health, for
VA research to maintain current service levels, the Medical and
Prosthetic Research appropriation should be increased in FY 2017 by 2.7
percent over the FY 2016 baseline simply to keep pace with inflation.
With this in mind, The Independent Budget recommends approximately $17
million to meet current services demands for research.
Numerous meritorious proposals for new VA research cannot be funded
without an infusion of additional funding for this vital program.
Research awards decline as a function of budgetary stagnation, so VA
may resort to terminating ongoing research projects or not funding new
ones, and thereby lose the value of these scientists' work, as well as
their clinical presence in VA health care. When denied research
funding, many of them simply choose to leave the VA.

Emerging Research Needs

In addition to covering uncontrollable inflation, the IBVSOs
believe Congress should appropriate an additional $17 million for FY
2017, for expanding research on emerging conditions prevalent among
newer veterans, as well as continuing VA's inquiries in chronic
conditions of aging veterans from previous wartime periods. For
example, additional funding will help VA support areas that remain
critically underfunded, including:
Post-deployment mental health concerns such as PTSD,
depression, anxiety, and suicide in the veteran population;
The gender-specific health care needs of the VA's growing
population of women veterans;
New engineering and technological methods to improve the
lives of veterans with prosthetic systems that replace lost limbs or
activate paralyzed nerves, muscles, and limbs;
Studies dedicated to understanding chronic multi-symptom
illnesses among Gulf War veterans and the long-term health effects of
potentially hazardous substances to which they may have been exposed;
and
Innovative health services strategies, such as telehealth
and self-directed care, that lead to accessible, high-quality, cost-
effective care for all veterans.

Million Veteran Program

The VA Research program is uniquely positioned to advance genomic
medicine through the ``Million Veteran Program'' (MVP), an effort that
seeks to collect genetic samples and general health information from 1
million veterans over the next five years. When completed, the MVP will
constitute one of the largest genetic repositories in existence,
offering tremendous potential to study the health of veterans. To date,
more than 400,000 veterans have enrolled in MVP. The VA estimates it
currently costs around $75 to sequence each veteran's blood sample.
Under the President's Precision Medicine Initiative, the IBVSOs
recommend $75 million to enable VA to process one quarter of the MVP
samples collected.

General Operating Expenses (GOE)
Veterans Benefits Administration

FY 2017 IB Recommendation $3.056 billion
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $2.708 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $2.826 billion

The Veterans Benefits Administration (VBA) account is comprised of
six primary divisions. These include Compensation; Pension; Education;
Vocational Rehabilitation and Employment (VR&E); Housing; and
Insurance. The increases recommended for these accounts primarily
reflect current services estimates with the impact of inflation
representing the grounds for the increase. However, two of the
subaccounts-Compensation and VR&E-also reflect a substantial increase
in requested staffing.
The IB recommends approximately $3.056 billion for the VBA for FY
2017. This amount reflects an increase of approximately $348 million
over the recently enacted FY 2016 appropriations level. Our
recommendation includes approximately $171 million in additional funds
in the Compensation account above current services, and approximately
$17.6 million more in the VR&E account above current services to
provide for new full-time equivalent employees (FTEE).

Compensation Service Personnel 1,700 New FTEEs$171 million

Over the past few years, VBA has made significant progress in
reducing the disability compensation backlog, which stood at over
600,000 claims in March 2013, to just over 77,000 in January 2016; this
represents nearly an 87 percent reduction in the backlog in just under
three years' time. In 2009, VBA issued decisions on 2.74 million
medical issues; that number more than doubled to 6.35 million in FY
2015. Today, VBA reports that on average, 92 days are required to
process a claim; in March of 2013, VBA required roughly 282 days.
Some of VBA's claims processing progress can be attributed to the
development and deployment of a new organizational model and new
information technology (IT) systems, including the Veterans Benefits
Management System (VBMS), e-Benefits, and the Stakeholder Enterprise
Portal (SEP). However, much of the increased productivity is the result
of simply putting more resources into processing claims, specifically,
the use of mandatory overtime. What remains unknown is whether VBA will
be able to manage its current claims inventory of 352,000 claims,
without needing to rely on mandatory overtime.
Recognizing that rising workload, particularly claims for
disability compensation, could not be addressed without additional
personnel, Congress provided VBA with more than 1,000 FTEEs between FY
2013 and FY 2016, primarily in Compensation Service. In FY 2016 alone,
Congress authorized VBA to hire an additional 770 FTEE. The new FTEE
were to be purposed for non-rating activities. However, taking into
consideration VBA's total workload, including appeals, these increases
in personnel have not been sufficient to keep pace with incoming
workload or to reduce the backlogs in these non-rating areas.
A blend of technology and people will be required to enable VBA to
provide veterans and their dependents with more timely and accurate
decisions. Necessary personnel increases should not be tempered against
a hoped-for future technological capability. Although VBA's new claims
processing systems have the potential to transform the delivery and
accuracy of benefits, its full effect may not be realized for years.
As a consequence of this concentrated effort to reduce the claims
backlog, the backlogs for other activities, including appeals, have
grown. As of February 2016, 440,000 appeals were pending, 360,000
within the jurisdiction of the VBA and the remainder within the
jurisdiction of the Board of Veterans Appeals. This growing appeals
backlog is a result of VBA's shift in focus and resources to process
disability claims, as evidenced by the fact that Decision Review
Officers (DROs) and Quality Review Specialists (QRSs) were performing
development and rating duties during both regular and overtime working
hours at many VA regional offices (VARO).
Considering the enormous growth in appeals, non-rating-activities
and other services, the IBVSOs believe that more accurate staffing and
production models are required to determine future resources for VBA.
For FY 2017, the IBVSOs will focus resource recommendations on
VBA's non-rating related work, appeals processing, and call center
needs. We recommend an additional 1,000 FTEE for FY 2017 that would be
dedicated to processing appeals at VBA in an effort to eliminate the
backlog of 360,000 appeals within the next three years. Depending on
the progress made over the next year, further personnel increases may
still be necessary to address this appeals backlog.
To address the growing backlog of non-rating related work such as
dependency claims, the IBVSOs recommend an additional 300 FTEE. In
order to address the delays experienced by callers contacting VBA call
centers, the IBVSOs recommend an additional 300 FTEE.
In addition, the IBVSOs recommend an increase of 100 FTEE for the
Fiduciary program to meet the growing needs of veterans participating
in VA's Caregiver Support programs. This recommendation is also based
on a July 2015 VA Inspector General report on the Fiduciary program
that found, ``.Field Examiner staffing did not keep pace with the
growth in the beneficiary population, [and] VBA did not staff the hubs
according to their staffing plan..''
Since VA may achieve future technological and organizational
productivity gains, we recommend that VBA hire a blend of permanent and
two-year temporary FTEEs to fill all new positions. At the end of the
two years, the best of those hired on a temporary basis could be
transitioned into permanent positions made available through attrition.
The IBVSOs believe this approach to staffing would offer a temporary
surge capacity, while also developing a group of experienced and
trained employees to fill positions that occur through attrition.

VR&E Service Personnel 158 New FTEEs $17.6 million

The Vocational Rehabilitation and Employment Service (VR&E), also
known as the VetSuccess program, provides critical counseling and other
adjunct services necessary to enable service disabled veterans to
overcome barriers as they prepare for, find, and maintain gainful
employment. VetSuccess offers services on five tracks: re-employment,
rapid access to employment, self-employment, employment through long-
term services, and independent living.
An extension for the delivery of VR&E assistance at a key
transition point for veterans is the VetSuccess on Campus (VSOC)
program deployed at 94 college campuses. Additional VR&E services are
provided at 71 select military installations for active duty service
members undergoing medical separations through the Department of
Defense and VA's joint Integrated Disability Evaluation System (IDES).
These additional functions of VR&E personnel are undoubtedly
beneficial to disabled veterans; however, staffing levels throughout
VR&E services must be commensurate with current and future demands and
their global responsibilities.
At the end of FY 2014, VR&E reported a total of 1,416 FTEEs
dedicated to direct VR&E services. VR&E projected an increase of 7.3
percent in program participation for FY 2015, and for FY 2016 an
additional 3.8 percent increase in participation was expected. Over the
previous two fiscal years, program participation was expected to
increase by 11.1 percent; however, the Administration failed to request
adequate staffing levels to keep pace with anticipated demand. In fact
for FY 2015 and FY 2016, only 1,442 direct personnel were requested,
with no increase for FY 2016.
Over the past five years, program participation has increased by an
average of 7.1 percent each year, and the IBVSOs project that total
program participation for FY 2017 will grow by at least 7.1 percent for
total caseload of approximately 147,000. In July 2015, VR&E reported
that its average Vocational Rehabilitation Counselor (VRC)-to-client
ratio was 1:139, which represented an increase from its previous 1:135
ratio. A more reasonable VRC-to-client ratio would consist of 1:125;
however, this benchmark may even be too high when taking into
consideration the overall responsibilities of VRCs, such as VSOC and
IDES.
In order to achieve and sustain a 1:125 counselor -to-client ratio
in FY 2017, we estimate that VR&E would need 158 new FTEE, for a total
workforce of 1,600 FTEE, to manage an active caseload of 147,000 VR&E
participants. At a minimum, three-quarters of the new hires should be
VRCs dedicated to providing direct services to veterans.
While increased staffing levels are required to provide efficient
and timely services to veterans utilizing VR&E services, it is also
essential that these increases be properly distributed throughout all
of VR&E to ensure that VRC caseloads are equitably balanced among
VAROs, which typically experience variable caseloads. As an example, a
January 2014 GAO Report found the Cleveland VARO's VRC ratio to be
1:206 and in the Fargo VARO, the ratio was 1:64.

General Administration

FY 2017 IB Recommendation $346 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $337 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $417 million

The General Administration account is comprised of nine primary
divisions. These include the Office of the Secretary; the Office of the
General Counsel; the Office of Management; the Office of Human
Resources and Administration; the Office of Policy and Planning; the
Office of Operations, Security and Preparedness; the Office of Public
and Intergovernmental Affairs; the Office of Congressional and
Legislative Affairs; and the Office of Acquisition, Logistics, and
Construction. For FY 2017, the IB recommends approximately $346
million, an increase of nearly $9.0 million over the FY 2016
appropriated level. This increase reflects only an increase in current
services based on the impact of uncontrollable inflation across all of
the General Administration accounts.

Board of Veterans' Appeals

FY 2017 IB Recommendation $134 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $110 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $156 million

Board of Veterans' Appeals Personnel 166 New FTEEs $23.1 million

Faced with a growing number of claims and resultant appeals, the
Board's staff grew from 510 FTEE in FY 2012 to 676 FTEE in FY 2015. For
2016, the Administration did not request funding for increased
staffing, despite an ever increasing workload; instead the FY 2016
budget proposed a reduction from of 669 FTEE to 662 FTEE.
Over the past few years, the Board has averaged approximately 90
appeal dispositions per FTEE, producing a record 55,532 decisions in FY
2014. Current data was not available at the time of this report;
however, we estimate that for FY 2015 the Board issued nearly 60,000
dispositions. Although most of the 440,000 pending appeals are in
various stages of processing at VBA, the Board currently has nearly
80,000 appeals in its jurisdiction. In order to process these 80,000
appeals in one year, based on 90 appeals per Board FTEE, the Board
would need approximately 890 FTEE; however, it did not receive any
increase for FY 2016, and will likely only be able to again dispose of
approximately 60,000 appeals.
Furthermore, as the number of claims processed annually continues
to rise as a result of the increased capacity of VBA, the number of
appeals is also expected to continue rising. Even with increased
accuracy in rating board decisions, on average 10 to 12 percent of
claims decisions are appealed. Thus, assuming VBA processes 1.5 million
claims next year-a reasonable estimate considering VBA processed over
1.4 million claims in both FY 2014 and FY 2015-roughly 150,000 appeals
would enter the system, with roughly half of them continuing on to the
Board for appellate review. In order for the Board to keep pace with
only this new incoming workload and not those appeals already in the
system, a total FTEE level of 833 would be required. Furthermore, a
significant number of Board remands return to the Board for another
round of appellate review, as many as 20,000 per year, requiring an
additional 217 FTEE to manage that workload.
About 360,000 appeals are backlogged at VBA, of which approximately
180,000 are expected eventually to reach the Board. If the goal were to
eliminate the backlog in three years, while simultaneously disposing of
both new incoming appeals and returning remanded appeals, then an
additional 666 FTEE would be required. In total, without any increases
in productivity, the Board would require 1,716 FTEE, almost tripling
its current workforce. Even if the Board could increase its
productivity by one-third to 120 appeals per FTEE, approximately 1,291
FTEE, almost double the current workforce, would be needed.
To meet current and future workload requirements, the Board will
need to continue adding new attorneys and veteran law judges, as well
as sufficient support staff; however, the Board could not absorb that
level of staffing growth while simultaneously managing its overall
workload. Approximately 18 months of training and orientation are
required for a new Board attorney to reach full productivity. Given the
time taken away from existing staff to train and mentor new staff, the
Board must strike a balance in its hiring strategy.
For FY 2017, the IBVSOs recommend an increase 166 FTEE for FY 2017,
a 25 percent increase, bringing the Board's total FTEE to 828. The
Board must expect to increase its personnel over the next couple of
years to continue to grow its capacity to handle the rising number of
appeals that will come from VBA's increased productivity.
Another option the Board may want to consider in future years would
be to authorize a mix of full-time and temporary hires, utilizing the
temporary workforce in a ``surge-capacity'' role to help reduce the
appeals backlog.

Departmental Administration and Miscellaneous Programs
Information Technology

FY 2017 IB Recommendation $4.209 billion
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $4.133 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $4.278 billion

In contrast to significant department-level IT failures, the
Veterans Health Administration (VHA) over more than 30 years
successfully developed, tested, and implemented a world-class
comprehensive, integrated electronic health record (EHR) system. The
current version of this EHR system, based on the VHA's self-developed
VistA public domain software, sets the standard for EHR systems in the
United States and was a trailblazer for years. However, parts of VistA
require either modernization or replacement. For example, one of its
component parts, the outdated scheduling module, contributed to VA's
recent access to care crisis. According to VA, this module is being
replaced on an expedited basis.
For FY 2017, the IBVSOs recommend approximately $4.2 billion for
the administration of the VA's IT program. This recommendation includes
no new funding above the planned current services level. Significant
resources have already been invested in VA's IT programs in recent
years, and we believe proper allocation of existing resources can allow
VA to fulfill its missions while modernizing its systems. We continue
to call for acceleration of the VBMS, and the implementation of an
appropriate solution for the Board of Veterans Appeals IT system.
Additionally, it is critical to ensure that sufficient funds are
directed at the incremental costs of implementation for the new
Veterans Choice Program (VCP). The VA identified a series of one time
incremental costs for IT systems in order to redesign, develop, and
deliver systems and technology solutions for the new VCP. Those
incremental costs range from $421 million in Phase I of the project, to
$606 million in Phase II, and finally $851 million in Phase III.
Without having a clear plan for when each of these Phases might
actually take place, The Independent Budget has chosen not to
explicitly recommend these funds in our IT funding recommendation.
However, we believe Congress must consider these costs in an effort to
assist the VA in implementing the new VCP.

National Cemetery Administration

FY 2017 IB Recommendation $275 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $271 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $286 million

The National Cemetery Administration (NCA), which receives funding
from eight appropriations accounts, administers numerous activities to
meet the burial needs of our nation's veterans.
In a strategic effort to meet the burial and access needs of our
veterans and eligible family members, the NCA continues to expand and
improve the national cemetery system, by adding new and/or expanded
national cemeteries. Not surprising, due to the opening of additional
national cemeteries, the NCA is expecting an increase in the number of
annual veteran interments through 2017 to roughly 130,000, up from
125,180 in 2014; this number is expected to slowly decrease to 126,000
by 2020. This much need expansion of the national cemetery system will
help to facilitate the projected increase in annual veteran interments
and will simultaneously increase the overall number of graves being
maintained by the NCA to 3.7 million in 2018 and 3.9 million by 2020.
Even as the NCA continues to add veteran burial space to its
expanding system, many existing cemeteries are exhausting their
capacity and will no longer be able to inter casketed or cremated
remains. In fact, as of 2016, the NCA expects four national cemeteries-
Baltimore, Maryland; Nashville, Tennessee; Danville, Virginia; and
Alexandria, Virginia-to reach their maximum capacity and will be closed
to first interments, though they will continue to accept second
interments.
In order to minimize the dual negative impacts of increasing
interments and limited veteran burial space, the NCA needs to:

Continue developing new national cemeteries;
Maximize burial options within existing national
cemeteries;
Strongly encourage the development of state veteran
cemeteries; and
Increase burial options for veterans in highly rural
areas.

Additional areas of growth within the NCA system include:

An increase in the issuance of Presidential Memorial
Certificates, which is expected to increase from approximately 654,000
in 2013 to more than 870,000 in 2017;
The expected increase in the burial of Native American,
Alaska Native, and Pacific Islander veterans; and
The possible increase, thanks to local historians and
other interested stakeholders, in requests for headstones or markers
for previously unidentified veterans.

Budgetary Resources for NCA Programs

With the above considerations in mind, The Independent Budget
recommends $275 million for FY 2017 for the Operations & Maintenance of
the NCA. The IBVSOs believe that this should include a minimum of $20
million for the National Shrine Initiative. Since FY 2013, national
shrine funding has decreased each year. The NCA must continue to invest
sufficient resources in the National Shrine Initiative to ensure that
this important work is completed.

Office of the Inspector General

FY 2017 IB Recommendation $138 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $137 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $160 million

The Office of Inspector General (OIG) received a significant
infusion of new resources for FY 2016 due to the high volume of work
that it has produced. And yet, the OIG has been under significant
scrutiny over the past year. We believe that the work requirements
assigned to this office have placed it under great stress and
potentially stretched it beyond its capacity. That being said, the
IBVSOs believe that the office does not warrant a staffing increase at
this time. We believe that the substantial increase that the OIG
received in FY 2016 should allow it to expand its staffing sufficiently
to meet the ever-growing demands on its work. With this in mind, the IB
recommends funding based on current services of approximately $138
million.

Construction Programs
Major Construction

FY 2017 IB Recommendation $1.50 billion
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $1.24 billion
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $528 million

Each year the Department of Veterans Affairs outlines its current
and future major construction needs in its annual Strategic Capital
Investment Planning (SCIP) process. In its FY 2016 budget submission,
VA projected it would take between $11.2 billion and $13.6 billion to
close all current and projected gaps in access, utilization, and
safety. Currently, VA has more than 30 major construction projects that
are either partially funded or funded through completion, but in which
construction is incomplete.
Last year VA requested and Congress appropriated a significant
increase in funding for major construction projects-approximately $1.24
billion. While these funds will allow VA to begin construction on key
projects, many other previously funded sites still lack the funding for
completion. One of these projects was originally funded in FY 2007,
while others were funded more than five years ago but no funds have
been spent on the projects to date. Of the 33 projects on VA's
partially funded VHA construction list, nine are seismic in nature.
It is time for the projects that have been in limbo for years or
that present a safety risk to veterans and employees to be put on a
course to completion within the next five years. To accomplish this,
the IBVSOs recommend that Congress appropriate $1.5 billion for FY 2017
to fund either the next phase or fund through completion all existing
projects, and begin advance planning and design development on six
major construction projects that are the highest ranked on VA's
priority list.
The IBVSOs also recommend, as outlined in its Framework for
Veterans Health Care Reform, that VA realign its SCIP process to
include public-private partnerships and sharing agreements for all
major construction projects to ensure future major construction needs
are met in the most financially sound manner.

Research Infrastructure

State-of-the-art research requires state-of-the-art technology,
equipment, and facilities. For decades, VA construction and maintenance
appropriations have not provided the resources VA needed to maintain,
upgrade, or replace its aging research laboratories and associated
facilities. The impact of funding shortages was vividly demonstrated in
a Congressionally-mandated report that found major, system wide
deficits in VA research infrastructure. Nearly 40 percent of the
deficiencies found were designated ``Priority 1: Immediate needs,
including corrective action to return components to normal service or
operation; stop accelerated deterioration; replace items that are at or
beyond their useful life; and/or correct life safety hazards.''
The report cited above estimated that approximately $774 million
would be needed to correct all deficiencies found, but only a fraction
of that funding has been appropriated since this report was made public
in 2012. The VA Office of Research and Development is conducting a
follow-up study of over a dozen key research sites. This update should
be available in mid-2016, the results of which can be used to guide VA
and Congress in further investment in VA research infrastructure.
Nevertheless, Congress needs to begin now to correct the most urgent of
these known infrastructure deficiencies, especially those that concern
life-safety hazards for VA scientists and staff, and for veterans who
volunteer as research subjects.
The IBVSOs believe that Congress should break this chronic
stalemate and designate funds to improve specific VA research
facilities in FY 2017 and in subsequent years. In order to begin to
address these known deficits, the IBVSOs recommend Congress approve at
least $50 million for up to five major construction projects in VA
research facilities.
The full report discussed above is available at www.aamc.org/varpt.
The House reports associated with this issue are House Report 109-95,
and House Report 111-559.

Minor Construction

FY 2017 IB Recommendation $749 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $406 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $372 million

In FY 2016, Congress appropriated $406 million for minor
construction projects. Currently, approximately 600 minor construction
projects need funding to close all current and future year gaps within
the next 10 years. To complete all of these current and projected
projects, VA will need to invest between $6.7 and $8.2 billion over the
next decade.
In August 2014, the President signed the Veterans Access, Choice,
and Accountability Act of 2014 (VACAA), Public Law 133-146. In this law
Congress provided $5 billion to increase health care access by
increasing medical staffing levels and investing in infrastructure
using these funds. VA has developed a spending plan that will obligate
$511 million for 64 minor construction projects over a two-year period.
VA planned to invest $383 million of these funds in FY 2015,
leaving $128 million for minor projects in FY 2016. It is important to
remember that these funds are a supplement to, not a replacement of,
annual appropriations for minor construction projects. To ensure that
VA funding keeps pace with all current and future minor construction
needs, the IBVSOs recommend that Congress appropriate an additional
$749 million for minor construction projects.
Additionally, the IBVSOs recommend $175 million in non-recurring
maintenance and minor construction funding to address needs of
facilities identified in the Congressionally-requested report on the
status of VA research facilities discussed earlier in this report.

Grants for State Extended-Care Facilities
(State Home Construction Grants)

FY 2017 IB Recommendation $200 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $120 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $80 million

Grants for state extend-care facilities, commonly known as state
home construction grants, are a critical element of federal support for
the state veterans' homes. The state home program is a very successful
federal-state partnership in which VA and states share the cost of
constructing and operating nursing homes and domiciliaries for
America's veterans. State homes provide over 30,000 nursing home and
domiciliary beds for veterans, their spouses, and gold-star parents of
deceased veterans. Overall, state homes provide more than half of VA's
long-term-care workload, but receive less than 15 percent of VA's long-
term-care budget. VA's basic per diem payment for skilled nursing care
in state homes is significantly less than comparable costs for
operating VA's own long-term-care facilities. This basic per diem paid
to state homes covers approximately 30 percent of the cost of care,
with states responsible for the balance, utilizing both state funding
and other sources. On average, the daily cost of care for a veteran at
a State Home is less than 50 percent of the cost of care at a VA long-
term-care facility.
States construction grants help build, renovate, repair, and expand
both nursing homes and domiciliaries, with states required to provide
35 percent of the cost for these projects in matching funding. VA
maintains a prioritized list of construction projects proposed by state
homes based on specific criteria, with life and safety threats in the
highest priority group. Only those projects that already have state
matching funds are included in VA's Priority List Group 1 projects,
which are eligible for funding. Those that have not yet received
assurances of state matching funding are put on the list among Priority
Groups 2 through 7.
In FY 2016, the estimated federal share for the 109 state home
construction grants requests that have been submitted by states was
over $1 billion. Of that amount, the states had already secured their
state matching funds required to put them in the Priority Group List 1
for 69 projects that will require $550 million in federal matching
funds. Last year, VA requested only $85 million and the IBVSOs had
recommended $200 million; Congress ultimately appropriated $120 million
funding for FY 2016, which will fund only the first 13 projects on the
FY 2016 Priority Group 1 List.
With almost $1 billion in state home projects still in the
pipeline, the IBVSOs again recommend $200 million for the state home
construction grant program, which we estimate would provide funding for
approximately 40 percent of the projects expected to be on the FY 2017
VA Priority Group 1 List when it is released at the end of this year.

Grants for State Veterans Cemeteries

FY 2017 IB Recommendation $52 million
----------------------------------------------------------------------------------------------------------------
FY 2016 Enacted Final Appropriation $46 million
----------------------------------------------------------------------------------------------------------------
FY 2017 Administration Request $45 million

The State Cemetery Grant Program allows states to expand veteran
burial options by raising half the funds needed to build and begin
operation of veterans' cemeteries. The NCA provides the remaining
funding for construction and operational funds, as well as cemetery
design assistance. As of September 2014, there were 49 projects with
state matching funds.
Funding eight projects in FY 2017 will provide burial options for
an additional 148,000 veterans. To fund these projects, Congress must
appropriate $52 million.

THE AMERICAN LEGION
``What we have done historically is that we have managed to a
budget number as opposed to managing to requirements.as a result we've
muddled along and not met the needs veterans deserve.''
- VA Acting Secretary Sloan Gibson before the House Committee on
Veterans Affairs July 24, 2014 \1\
---------------------------------------------------------------------------
\1\ HVAC Hearing ``Restoring Trust: The View of the Acting
Secretary and the Veterans Community'' - July 24, 2014
---------------------------------------------------------------------------
When now Deputy Secretary of the Department of Veterans Affairs
(VA) Sloan Gibson addressed this committee nearly two years ago, he was
not advocating the budgetary planning approach he described, but
speaking to the problems that long standing approach could cause.
Drawing contrasts with the planning models he was familiar with in the
private sector, Deputy Secretary Gibson noted the historical approach
was about managing to requirements. For VA to succeed and be great,
they need to be able to move beyond managing requirements and move
towards building planning based on need.
Chairman Miller, Ranking Member Brown, and Members of the
Committee:
On behalf of National Commander Dale Barnett and the over million
members of The American Legion, we welcome this opportunity to comment
on the federal budget, and programs of the Department of Veterans
Affairs (VA).
The American Legion is a resolution based organization; we are
directed and driven by the millions of active legionnaires who have
dedicated their money, time, and resources to the continued service of
veterans and their families. Our positions are guided by nearly 100
years of consistent advocacy and resolutions that originate at the
grassroots level of the organization - the local American Legion posts
and veterans in every congressional district of America. The
Headquarters staff of the Legion works daily on behalf of veterans,
military personnel and our communities through roughly 20 national
programs, and hundreds of outreach programs led by our posts across the
country.
What we present here is an attempt to focus on a few particular
issues and projected needs, rather than what has been the historical
and problematic approach of presenting a budget based on a number.
While the budget numbers have gone up for VA, indicative of the
commitment that Congress has shown even in tight fiscal times, there
has still been the tendency to set an number and manage to that limit,
rather than projecting the need and divining numbers from that need.
In terms of future planning, and ensuring that VA's budget meets
needs in critical areas, The American Legion directs the committee's
focus to three critical areas: the consolidation of outside care,
ensuring VA's medical hiring needs are met, and addressing the rising
backlog of appeals.

Consolidation of Outside Care:

When the Choice Card program was added as a temporary emergency
measure as a part of the Veterans Access, Choice and Accountability Act
(VACAA) of 2014 \2\ The American Legion supported the program because
we had seen firsthand the need across the country. During 2014 The
American Legion set up a dozen Veterans Crisis Command Centers (VCCCs)
in affected areas from Phoenix to Fayetteville and spoke to hundreds of
veterans personally affected by the scheduling problems within VA. The
Choice Card program provided an immediate short term option, but also
provided an opportunity to learn from how veterans utilized the
program. At the time, The American Legion advised gathering as much
data as possible from veterans' use of the program to make all of VA's
other existing authorities for care in the community \3\ better in
their ability to serve veterans.
---------------------------------------------------------------------------
\2\ Public Law P.L. 113-146
\3\ Such as Project Access Received Closer to Home (ARCH), the
Patient Centered Community Care (PCs) program and others
---------------------------------------------------------------------------
Ultimately that has led to the current transformation in VA's
community care programs. As directed by the Surface Transportation and
Veterans Health Care Choice Improvement Act of 2015 (VA Budget and
Choice Improvement Act) in July 2015, VA has developed a plan to
consolidate all existing programs into a single community care program,
the New Veterans Choice Program (New VCP). Generally, The American
Legion supports the plan to consolidate VA's multiple and disparate
purchased care programs into one New VCP. We believe it has the
potential to improve and expand veterans' access to health care. Much
depends, however, on the department's success in working with its
employees, Congress, VSOs, private providers, academic affiliates, and
other stakeholders as the agency moves forward in developing and
implementing the plan.
However, with an eye towards budgetary matters, there are two
important considerations revolving around this new transformation that
must be implemented in future budgets. VA must have the ability to
spend all community care monies under the new framework, and the
additional funding required to provide for the Choice Card program
needs to be factored into future budgets.
During 2015, VA ran into problems with budgetary shortfalls because
of the separation in funding between Choice Card care and other
community care authorities. Because of the strong push to ensure
veterans were seen as quickly as possible, VA quickly exhausted care in
the community funding, while emergency funding for the Choice Card
program was still available. VA was forced to seek, and was granted,
authority to move some of the $10 billion allocated to fund the Choice
Card program over the three year pilot to cover care in the community
costs.
By now, as the transformation of care in the community moves
forward to a plan with a single, overarching authority for this care
(New VCP) the distinctions between the VACAA Choice funds and community
care funding should be academic. While The American Legion understands
there are reasons certain funding and accounts have limitations, and is
not advocating for a wholesale removal of barriers for VA to move
funding, in this instance is makes perfect logical sense. Care in the
community is care in the community, and VA must have a single stream of
funding for this.
However, it is equally important that the need for the extra
funding was and is real. The VACAA provided $10 billion for treating
veterans in the community through Choice because the need to fund that
care was real. Those needs are not going away. As of last month, VA had
over 6.1 million appointments scheduled nationwide, and over 8.5% of
those appointments are still waiting over 30 days for treatment. \4\ VA
has seen their number of completed appointments jump by over 2.6
million last year, and they are throughout his continuing to authorize
millions of appointments for outside care.
---------------------------------------------------------------------------
\4\ VA Pending Appointments - January 15, 2016
---------------------------------------------------------------------------
The $10 billion from VACAA was provided as emergency funding, but
in the future, we must plan for the tremendous demand on the VA system.
This is a direct illustration of the managing to numbers versus
managing to need contrast mentioned above. For future budgets, we must
ensure that VA is receiving funding for care that adequately reflects
how they must deliver that care. A robust budget for VA medical care is
necessary, but as the past few years have shown VA has been dependent
as well on care in the community to provide timely care to veterans
where they are overburdened by scheduling, staffing, or lack of
appropriate resources in the community. This needs to be reflected in
the community care budgets, not as an emergency measure when the
problem boils over and out of control.

Ensuring Proper VA Staffing:

One reason VA may sometimes struggle to provide care within the
Veterans Health Administration (VHA) is directly related to staffing.
The staffing figures can be ugly. One in six positions nationally for
some critical jobs remain vacant, and critical needs like psychiatric
workers can see vacancy rates of 40-64%. \5\
---------------------------------------------------------------------------
\5\ USA Today - September 2015
---------------------------------------------------------------------------
To be fair, the VACAA already provided funding for 10,000 new
health care positions, however funding new positions alone may not be
the solution and there may be budgetary means to address some of the
vacancies. Even when VA is hiring an additional 9% of their workforce
they are losing a similar amount to attrition. \6\ Some of this could
be improved with better hiring incentives and more competitive wages,
particularly in key fields of need such as psychiatric care,
physician's assistants, nurses and physical therapists.
---------------------------------------------------------------------------
\6\ VA Office of the Inspector General (VAOIG) Report No. 15-03063-
511 ``OIG Determination of Veterans Health Administration's
Occupational Staffing Shortages'' - September 2015
---------------------------------------------------------------------------
To be sure, as the Office of the Inspector General recommended, VA
also bears additional responsibility in the form of the development of
better staffing models and examining the red tape and bureaucratic
burdens that stretch hiring out into a process that can take nine
months or longer. \7\ However, additional examination of where VA can
better incentivize prospective applicants to decide on a career serving
veterans would be helpful. We need to ensure VA has proper funding to
get the best and brightest team members on their medical and
psychological staffs serving veterans.
---------------------------------------------------------------------------
\7\ Ibid
---------------------------------------------------------------------------
The VA can further help improve their staffing, especially in
leadership positions, with better succession planning for VA employees
to rise to leadership levels within the organization. As an
organization of advocates that has worked hand in hand with VA for
decades, The American Legion notes the training programs VA had in
place during the 1990's were better suited to creating the next
generation of leadership than the current programs in place. The VHA
training programs of the 1990's were specifically built to prepare
administrative employees to assume mid-level management programs at the
department level. This could include personnel, fiscal, medical
administration, associate director training and other leadership
training. The programs were replaced, over time, with VA's current
Leadership Development Programs, but feedback The American Legion has
garnered from interacting with VHA personnel during visits from our
System Worth Saving Task Force has indicated these programs are not
providing the tools the employees need to be the next generation
leaders of VA and to lead from within. Additional consideration to
revamping this portion of training, and ensuring this training is
properly funded, could be a key component to reducing VA's reliance on
the complicated process of hiring from outside VA and ultimately reduce
the number of unfilled leadership positions.

The Looming Appeals Crisis:

Last year, 2015, was the year VA was supposed to ``break the back
of the backlog'' of veterans' claims for disability benefits. While VA
has made substantial progress according to their public figures in
reducing the number of initial claims - the ``claims backlog'' sits at
around 77,000 claims today \8\ down from a peak of over 600,000 claims
in early 2013 - those numbers do not reflect the waiting period for
many veterans who have been waiting for three or more years for their
appeals to be decided. Over that same period the number of appeals has
soared to over 325,000 from their level of 250,000 in 2013. \9\ VA
defines ``backlog'' as any case pending over 125 days. Every single
appeal represents a veteran who has been waiting for much, much longer
than 125 days, but those 325,000 appeals are not counted as part of the
``backlog.''
---------------------------------------------------------------------------
\8\ VA Claims Backlog Dashboard - January 30, 2016
\9\ VA Monday Morning Workload Report - February 1, 2016
---------------------------------------------------------------------------
Often the fastest way to resolve an appeal is with a Decision
Review Officer (DRO) in a Regional Office (VARO). The DROs are among
the most experienced employees, and can discern aspects of a claim that
a newer employee might miss, furthermore after an initial denial the
veteran can be better equipped to provide information the VA noted was
lacking in the initial denial. Because everything stays within the
VARO, correspondence with the veteran and with a service officer
helping that veteran is direct and many claims can be resolved more
quickly through this process. The DRO review can be one of the best
tools for speedy adjudication of an appeal and to reduce the appeals
backlog. However, the unfortunate case recently is that DROs have not
always been free to handle their appeals workload.
The Veterans Benefits Administration (VBA) has been under a
singular mission to reduce the backlog. To this end they have forced
over four years of mandatory overtime, and key veteran staffers
including DROs have seen their workloads adjusted to focus on the
initial claims, the claims that are counted in the VA statistics for
``backlog.'' This can have the effect of keeping DROs from devoting
full attention to their appeals workload, and the growing appeals
backlog cannot be seen as an accident.
Last year, The American Legion noted that occasional mandatory
overtime in a short term crisis is prudent management, but four
straight years is indicative of an organization that's clearly
understaffed. The American Legion reiterates our call for better study
of VBA staffing models, but also notes that last year VA had proposed
making the DRO process more robust, something we wholeheartedly
support.
``DROs can often resolve appeals more rapidly than the appeal
process at the Board of Veterans Appeals (BVA) and with greater
accuracy and clarity than the average VA rater. Reports have indicated
in some offices the DROs have been reassigned to other tasks as the
pressure mounts to work on initial claims. It would be the hope of The
American Legion that renewed interest in hiring and increasing the DRO
force would allow DROs to return to their appeals duties, and help
prevent a rising backlog in the appeals area.'' \10\
---------------------------------------------------------------------------
\10\ Testimony of The American Legion - HVAC Hearing February 11,
2015
---------------------------------------------------------------------------
There have been many recent proposals for measures to transform
appeals as the initial claims process was transformed by the Veterans
Benefits Management System (VBMS) and the Fully Developed Claims (FDC)
process. The American Legion is supportive of transformative thinking,
clearly the system as it has existed in the past has many flaws and has
not always served veterans with the ability to develop prompt and
accurate decisions on disability claims. However, it is also critical
to understand that there is important due process in the system to
protect veterans, and we cannot abandon these things in the interest of
simply faster decisions or more convenience for VA.
Due process is important to protect veterans, especially veterans
who may be uniquely vulnerable due to their disabilities incurred in
the service of this nation. It is one of the reasons the veterans'
disability claims system has been specifically cited as ``uniquely pro-
claimant'' in the manner it serves veterans filing for benefits. \11\
Veterans need to depend on the ability to get a DRO review in a timely
fashion, or to submit evidence in response to the VA when they are
informed their claim is lacking proof of a key point, such as
documentation of an event that happened in service.
---------------------------------------------------------------------------
\11\ See Jaquay v. Principi, 304 F.3d 1276, 1280 (Fed. Cir. 2002);
Nolen v. Gober, 222 F.3d 1356, 1361 (Fed. Cir. 2000); Hensley v. West,
212 F.3d 1255, 1262 (Fed. Cir. 2000).
---------------------------------------------------------------------------
One of the best things to help address the growing appeals backlog
would be to increase funding for DROs to fully staff all offices and to
add additional full time employees elsewhere within the offices to get
the DROs back to doing what they do best, reviewing appeals in a timely
manner. The budget should also reflect additional funding to study
proper staffing levels within the VBA, because four years of mandatory
overtime is a warning flag that has been waving to tell us we're not
supplying enough staff to deal with the backlog of veterans' claims.
Whether it is appeals or initial claims, a backlog is a backlog,
and the budget must reflect sufficient resources to address these
claims, otherwise veterans will be forced to do what we have become all
too familiar with, wait.

Conclusion:

The VA cannot afford to be run as an entity reactive to one crisis
after another. Effectiveness stems from long term planning, and to be
truly effective that long term planning needs to include all
stakeholders. While there are other areas that can benefit from
predicting crises before they occur and providing resources to
perceived needs, these three areas represent a key start in the sort of
thinking that must be adopted to make VA successful in the long run.
In order to assimilate all outside care under one cohesive
management authority VA needs the budget flexibility to utilize the
Choice Card funds for community care as well as to see a boost to
community care funding commensurate with the increased demand. The
VACAA infused $10 billion in care funding because there was an
emergency, but the demand has not gone away and future funding levels
must reflect this as part of the plan, not a reaction to a crisis.
There must be attention paid to VA's hiring and incentives, and if
additional resources are needed to secure key providers like
psychologists and physician's assistants, then VHA must be provided
with the funding needed to secure those key performers. That is the
long term key to ensuring veterans get the care they need in a timely
fashion in the system that is designed to treat their unique wounds of
war.
Four years of mandatory overtime and reassignment of DROs needs to
stop if VA is going to prevent the growing appeals backlog from
reaching disaster levels. Funding must be given to better assess the
workforce within VBA and to provide the full time employees needed to
accomplish the mission while keeping top assets like DROs working on
the work they do best.
Questions concerning this testimony can be directed to The American
Legion Legislative Division (202) 861-2700, or ideplanque@legion.org

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