[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]




 
       VA HEALTH CARE: STRUCTURAL PROBLEMS, SUPERFICIAL SOLUTIONS

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                   VETERANS AFFAIRS AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 14, 2002

                               __________

                           Serial No. 107-192

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform


                                 ______

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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia                    DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida                  ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California                 DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky                  JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia               JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania    THOMAS H. ALLEN, Maine
DAVE WELDON, Florida                 JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia                      ------
JOHN J. DUNCAN, Jr., Tennessee       BERNARD SANDERS, Vermont 
------ ------                            (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

 Subcommittee on National Security, Veterans Affairs and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
ADAM H. PUTNAM, Florida              DENNIS J. KUCINICH, Ohio
BENJAMIN A. GILMAN, New York         BERNARD SANDERS, Vermont
ILEANA ROS-LEHTINEN, Florida         THOMAS H. ALLEN, Maine
JOHN M. McHUGH, New York             TOM LANTOS, California
STEVEN C. LaTOURETTE, Ohio           JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky                  JANICE D. SCHAKOWSKY, Illinois
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
DAVE WELDON, Florida                 DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
              Kristine McElroy, Professional Staff Member
                           Jason Chung, Clerk
           David Rapallo, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 14, 2002.....................................     1
Statement of:
    Bascetta, Cynthia, Director, Health Care, Veterans Health and 
      Benefits Issues, General Accounting Office, accompanied by 
      Dr. James C. Musselwhite, Jr., Assistant Director, Health 
      Care, General Accounting Office; Gerald Donnellan, 
      director, Rockland County Veteran Service Agency; John C. 
      Bachman, U.S. Air Force Captain (Retired); and Edmund 
      Burke, co-chair, VA Connecticut Mental Health Advisory 
      Board......................................................    40
    Roswell, Dr. Robert, Under Secretary, Health, Department of 
      Veterans Affairs, accompanied by Dr. Jeanette Chirico-Post, 
      Director, Veterans Integrated Service Network 1, Department 
      of Veterans Affairs; and James J. Farsetta, Director, 
      Veterans Integrated Service Network, Department of Veterans 
      Affairs....................................................     9
Letters, statements, etc., submitted for the record by:
    Bachman, John C., U.S. Air Force Captain (Retired), prepared 
      statement of...............................................    75
    Bascetta, Cynthia, Director, Health Care, Veterans Health and 
      Benefits Issues, General Accounting Office, prepared 
      statement of...............................................    42
    Burke, Edmund, co-chair, VA Connecticut Mental Health 
      Advisory Board, prepared statement of......................    63
    Donnellan, Gerald, director, Rockland County Veteran Service 
      Agency, prepared statement of..............................    70
    Roswell, Dr. Robert, Under Secretary, Health, Department of 
      Veterans Affairs, prepared statement of....................    11


       VA HEALTH CARE: STRUCTURAL PROBLEMS, SUPERFICIAL SOLUTIONS

                              ----------                              


                         TUESDAY, MAY 14, 2002

                  House of Representatives,
Subcommittee on National Security, Veterans Affairs 
                       and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:06 p.m., in 
room 2154, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays, Gilman, Weldon, Putnam, 
Otter, Sanders, Kucinich, Tierney, Allen and Watson.
    Staff present: Lawrence J. Halloran, staff director and 
counsel; Kristine McElroy and Thomas Costa, professional staff 
member; Jason M. Chung, clerk; David Rapallo, minority counsel; 
and Earley Green, minority assistant clerk.
    Mr. Shays. A quorum being present, the Subcommittee on 
National Security, Veterans Affairs and International Relations 
hearing entitled, ``VA Health Care: Structural Problems, 
Superficial Solutions,'' is called to order.
    Each time we examine the quality and quantity of health 
care delivered by the Department of Veterans Affairs, VA, we 
are told the veterans' equitable resource allocation or VERA 
system will evolve and improve in matching scarce resources to 
urgent needs. But as we heard in three previous sessions, since 
1997--in Washington, New York and Massachusetts--VERA remains 
insensitive to significant regional differences in costs and 
patient demographics. As a result, access to care can be 
limited, delayed, or denied altogether as funding is spread 
inefficiently across the VA's 22 health care networks. A system 
designed to account for patient workload fails to account for 
fully one-fifth of those seeking care. So-called wealthier 
veterans in eligibility Priority 7 are largely excluded from 
VERA calculations on the dubious rationale ignoring them might 
limit their numbers.
    Veterans' integrated service networks, VISNs, treating a 
growing number of Priority 7 patients, do not get paid for 
doing so. Other categories of care obviously suffer. VERA also 
fails to capture changes in the types of care provided by 
relying on old data to apportion funding allocations between 
basic and complex health services. Other regional cost 
variations go undetected as well because the current system 
uses only 3 of a possible 44 categories to characterize patient 
mix.
    According to the General Accounting Office, GAO, these 
rigidities limit VERA's ability to allocate comparable 
resources for comparable workloads between regions with 
differing types of patients. Systematic problems produced by 
VERA's lack of sophistication are addressed only cosmetically 
through a process of supplemental funding which can appear to 
punish efficiencies while rewarding waste. In the delicate work 
of surgically dividing a finite VA health budget among the 
Nation's veterans, VERA is still just too blunt an instrument.
    VA pleas for time, not months but years, to ponder 
corrective actions, long obvious to some, ignore the plight of 
veterans, particularly those in the Northeast who have already 
lingered too long in the health care gaps and voids created by 
VERA's inequities.
    We asked our witnesses to describe in greater detail the 
impact of chronic VA health care funding shortfalls and what is 
being done to retool the VERA system into the sophisticated 
health care model envisioned by Congress in 1996. We look 
forward to their testimony.
    At this time I would like to recognize Mr. Sanders.
    Mr. Sanders. Mr. Chairman, thank you very much for holding 
this extremely important hearing for those of us in the 
Northeast. Let me just say a few words because this is an issue 
I feel very strongly about and this is an issue I get extremely 
angry about, and I would like some comments later on from our 
panelists.
    You know, men and women throughout this country put their 
lives on the line, they go to war, some of them come back 
wounded in body and some of them come back wounded in spirit. 
And this is the richest country in the history of the world. We 
are so rich, my friends, that we were able to give $500 billion 
in tax breaks to the wealthiest 1 percent of our population, 
people with a minimum income of $375,000 a year. We are so rich 
that we can increase military spending for all kinds of exotic 
weapons systems, but apparently we are not rich enough to make 
sure that the men and women who put their lives on the line, 
who were wounded, get the quality care that they were promised. 
This is an absolute disgrace.
    Now I understand that the people on the panel are not the 
President of the United States. I do understand that. My eyes 
are good enough. But I think we have a right to demand of you, 
if you are serious about providing health care, quality health 
care, to the veterans of this country--and I know that Dr. Post 
is. We had a very good meeting on April 1st, and I thank you 
very much for the work that you did. We met her in White River 
Junction. You have got to tell us, and be very loud and vocal, 
about the needs of veterans so that this Congress can work to 
appropriate the adequate kinds of money that our veterans need. 
I consider that your job, and if you're not doing that job, if 
you're not coming forward to Congress and saying we don't have 
sufficient resources, I don't believe that you are doing your 
job.
    So the first point that has to be made is that Federal 
funding for the VA is inadequate. Some will say, well, the 
President has put more money into funding. Yes, that's true, 
but the other half of the equation, as our panelists will speak 
to, is that the VA, from one end of the this country to the 
other, is seeing a huge increase in the number of people who 
use the services, and given that huge increase, because of the 
health care crisis and the crisis in prescription drugs, more 
and more people coming into the system, clearly the funding is 
inadequate on a national level. And the reason that the 
chairman called this hearing is that we believe the VERA 
formula clearly is not adequate for the Northeast.
    Let me just mention a few points, if I might. To the best 
of my knowledge, from 1996 to 2002, Network 1, our network, New 
England, has experienced a 22 percent decrease in VERA 
allocations from that period.
    Furthermore, since full-time employees are the largest 
portion of the network's expenditure, we have seen in our 
region a loss of over 2,700 employees. So as I understand it, 
and I would appreciate later on if the panelists think that I'm 
wrong here, a huge increase in the number of people using the 
facility, cutbacks in funding, cutbacks in employing, and what 
are the results? Let me read you what the results are.
    May 9, 2002 from the director of Veterans Affairs in White 
River Junction, and I quote from a letter sent to veterans in 
the State of Vermont. ``Due to an overwhelming demand for 
services, we have reached a full patient capacity in our 
primary care clinics. New patients will be accepted; however, 
appointments will be provided on a space-available basis as 
patients leave the VA.''
    We have, I believe, in the State of Vermont and one 
bordering us in New Hampshire, five very good outpatient 
clinics. The only problem is they no longer have the capability 
of accepting new patients. This is absolutely unacceptable, and 
I look forward to working with the chairman and other members 
of this committee to change the formula and to demand, by the 
way, that the U.S. Congress adequately fund the VA so that all 
of our veterans from one end of this country to the other get 
the care they need, and we do not have to see horror stories as 
exist in some hospitals where, as I understand it, veterans are 
waiting years before they can get into that facility. This is 
unacceptable. We have got to address this issue.
    Mr. Chairman, thank you very much.
    Mr. Shays. I thank the gentleman. At this time the Chair 
recognizes Dr. Weldon.
    Dr. Weldon. Thank you, Chairman, for calling this hearing, 
and I certainly am pleased to see Dr. Roswell here to testify. 
I had the pleasure of working with Dr. Roswell when he was the 
VISN director of VISN 8 in Florida. While Dr. Roswell presided 
over VISN 8, we saw the funding for VISN 8 increase by about 40 
percent; however, we also saw the number of veterans seeking 
service in VISN 8 increase by 40 percent. This is a critical 
point because as we look at the impact of VERA, we must also 
consider the dramatic increases in utilization of the VA that 
we have seen all over the country, especially in Florida. While 
VERA has made funding a little more equitable, those of us 
representing growth States still see significant funding 
problems and believe that much more progress needs to be made.
    While the chairman and I come from two different regions of 
the country and come at the VERA program from different 
perspectives, I believe that we share and all the members of 
the committee share the common goal of working toward the best 
service for our veterans, those who have sacrificed, defending 
our liberties. Just yesterday I received the following message 
from one of those veterans in my congressional District, Mr. 
Ord, who wrote to me, saying, ``Veterans' health care at 
Vierra''--by the way, the clinic in my district is in a town 
called Vierra, a little confusing there--``The veterans' health 
care in Vierra claims they can't accept any more veterans. I am 
a disabled veteran from World War II. The steel company I 
worked for went out of business. I lost my hospitalization and 
need protection from the high cost of medicines. I am 80 years 
of age, and back in 1943 and 1944, I flew 69 missions over 
Europe as a tail gunner and I have the Purple Heart. I was also 
promised health care.''
    Another constituent wrote to me, saying, ``I have been 
enrolled with the VA clinic at Vierra for well over 1 year. I 
am a Category 5, nearly poverty level income. I am told that 
they are not making any more appointments and haven't for over 
1 year. They do not know when the situation will change. What 
good is the VA clinic if they won't make any new appointments? 
My income in 2001 was $22,000. My medical bills were $9,000.''
    Just for the record, I wanted to read, and I actually have 
it on tape, the recorded message that veterans who have called 
the veterans' clinic in my district have been receiving for 
several months. ``you have reached the Brevard County VA 
outpatient clinic enrollment eligibility office. We are either 
on the phone or assisting other veterans at this time. If you 
are calling about the status of your application, our clinic 
has reached full capacity and we cannot take any new 
appointments. If you have submitted an application after 
January 1, 2002, your name will automatically be placed on our 
waiting list and you will receive a letter when we can start 
taking new patients again. We do not anticipate that happening 
this year, so please do not call us to ask where you are on the 
list or how long it will be before we contact you. If you wish 
to be placed on the waiting list, please leave your name, full 
Social Security number.''
    Clearly we do not have enough resources in many regions. We 
have heard from the gentleman from Vermont. Obviously we have a 
problem in Florida. We need to meet the needs of the thousands 
of veterans like these who are waiting to enroll or simply 
waiting for an appointment to see a provider.
    I also know about the shortage firsthand. I volunteer once 
a month at the veterans' clinic in my congressional district 
seeing patients, so I see it up close and personal.
    I would like to point out that I was provided a very 
disturbing letter. The validity and the accuracy of this letter 
and the timeliness of it I do not know, but it was issued from 
the Bronx VA medical center. Evidently it was sent out sometime 
last year and it read, ``On behalf of the VA, may we extend our 
best wishes to you on your birthday. As part our 
reorganization, the VA medical centers are expanding to make 
our facilities more friendly and accessible to all veterans. At 
present we have a program whereby all veterans may receive a 
yearly physical examination free, thereby offering one and all 
the opportunities to see for themselves at no expense the 
quality services offered by our team of expert medical 
clinicians. Also, veterans scheduling a free physical exam will 
receive a free eye exam and glasses,'' and it just goes on and 
on from there.
    Meanwhile, I've got a 78-year-old veteran who wrote to me 
complaining that he has been told he has to wait a year to get 
his hearing checked. Clearly we have some problems within the 
system. Clearly VERA needs to be updated. I am very sensitive 
to the issues and the challenges that we are facing all over 
the country, but in Florida we now have 42,000 veterans on a 
waiting list. 42,000 veterans.
    Mr. Shays. Amazing.
    Dr. Weldon. VISN 8 has 400,000 veterans, trying to get 
access of VISN 8. I believe most Veterans are serving a 
population of about 100,000. So the timeliness of your hearing, 
Mr. Chairman, is incredible and I'm looking forward to the 
testimony from all of our witnesses, and thank you for 
providing me this opportunity.
    Mr. Shays. I thank the gentleman. At this time the Chair 
will recognize Mr. Allen.
    Mr. Allen. Thank you, Mr. Chairman, and I want to thank you 
especially for holding this hearing this afternoon. I am 
particularly pleased that John Bachman is here from Togus. He 
is a true New England patriot. Mr. Chairman, he has been 
awarded the Purple Heart and is one of Maine's staunchest and 
most knowledgeable veterans' advocates. I've enjoyed working 
with John and his committee, and I appreciate his willingness 
to be here.
    I also want to welcome Dr. Post. I think Dr. Post has one 
of the most challenging jobs in the government, but she is 
truly committed to providing high quality health care to New 
England's veterans, and I have really enjoyed working with her.
    I also want to thank the many veterans and VA staff who 
have helped me to understand the complex situation we have at 
Togus in Maine, particularly Helen Hanlon, Gary Larson, Linda 
Loriason, Admiral Rich Rybacki, and Ron Warner, who is probably 
Maine's most insistent veterans' advocate. And I want to say a 
word about Jack Simms and the staff at Togus. This is a very 
dedicated and hard working group of people. I think that they 
do everything they can. The veterans I talk to are very 
supportive of the staff at Togus, but they believe and they 
tell me that the facility is understaffed, overworked and 
sometimes micromanaged by the VISN headquarters.
    In Maine for the last 2 years or so, the VA medical system 
has added over 500 veterans to its practice every single month. 
Under the current compensation formula, this should mean a 
commensurate increase in funding for those facilities, but 
unfortunately the VERA formula also contains a huge 2-year lead 
time in recognizing this increase. That is, although Maine 
facilities are caring for these additional veterans now, they 
won't see the increase in allotment for a very long time, and 
this is unacceptable. The increase is a reflection of the 
booming demand by veterans for medical care. This is not solely 
just a result of the aging of the veteran population. In fact, 
Vietnam era veterans have now surpassed World War II veterans 
as the largest group of patients seeking care at Federal 
hospitals.
    Moreover, as the cost of private health care and health 
insurance continue to soar, we can expect that use of VA 
medical facilities to increase further. In short, for many 
Americans, the health care system is breaking down and that is 
a large part of why you are seeing more and more people who are 
veterans turning to the Veterans Administration for servicing, 
particularly to deal with the cost of their prescription drugs.
    The principal problems at the VA facilities in New England 
have been the lack of sufficient resources and regional 
recruiting difficulties, compounded by an uncompensated 23 
percent of loss of purchasing power, and that's what I would 
argue sets us apart from other areas in the country. While 
other areas in the country have been getting more veterans and 
more funding, VISN 1 and VISN 3 have been getting more veterans 
and less funding. In my opinion, these issues have been 
exacerbated by the VA's reluctance to acknowledge that the VERA 
formula does not adequately factor in regional cost 
fluctuations or increased funds in a timely manner, and I have 
to add here that I want to associate myself with Congressman 
Sanders' remarks. The tax cut passed last year was, in my 
opinion, the single most reckless and irresponsible legislative 
act in the last 6 years and the problems it creates come to 
light in the way we deal with our veterans because we can't 
find enough money, it seems, to provide them with the care that 
they deserve.
    I hope today to learn more about the impacts of the 
organizational and financial changes the VA is going through. I 
hope to find out how the VA, and VISN 1 in particular, and 
Togus will improve services to our Maine veterans and what more 
needs to be done, and I hope we can learn today how to work 
together more effectively to make sure that our veterans are 
treated with respect and dignity and that they receive the 
health care they need and have earned.
    I believe that we can use this time of renewed appreciation 
for our veterans to build them a more secure future. They did 
not let our country down during our time of need. They are not 
doing it now. And we must not fail veterans by abandoning them 
in their time of need.
    Mr. Chairman, thank you. I have a longer statement that I 
would like to submit for the record.
    Mr. Shays. That will be done.
    Thank you, Mr. Allen. At this time the Chair recognizes 
Butch Otter.
    Mr. Otter. Thank you very much, Mr. Chairman. And being 
from Idaho, after listening to all these other huge numbers, 
I'm a little bit sheepish about bringing up my group, but I 
guess to the individual it makes no difference. When you need 
the help, you need the help, but in this age of changing 
demographics, it is difficult to relocate a lot of the needs 
for the veterans, and so I'm pleased that you, Mr. Chairman, 
have demonstrated the leadership in recognizing the problem and 
bringing this, and we hope, I hope, that this panel and these 
panels that we will engage with today will come up with some 
opportunities and some ideas and some progress for us.
    In addition to the regional economic difference in the 
maintenance cost, it is also important, I believe, for us to 
examine the additional financial factors such as the increase 
in administrative burdens at the veterans' health centers that 
are a result of the sharp increase in Priority 7 veterans 
seeking to access the care. The GAO reported that the number of 
veterans who are being treated by the Veterans Administration 
who do not have a service-connected disability has increased 
since 1996, when they accounted for only 4 percent of the total 
veterans treated last year. They now account for 22 percent of 
the Veterans Administration patient workload, and my good 
colleague and friend from Florida here just explained to me why 
that is part of the problem, and I hope that is one of the 
things that we will engage in in this discussion is how many 
other medical resources do we have that are competing for 
attention and competing for the limited resources because, as 
Mr. Weldon just explained to me, one of his problems in Florida 
is that in order to access a pharmaceutical dimension, instead 
of being able to go to Medicare, a lot of folks now turn to the 
Veterans Administration in an effort to get into there. But 
given this increase in the nonservice-connected disability, 
it's easy to see why it's not uncommon for veterans in the 
State of Idaho to wait about a year and in some cases longer 
just to get in to see a doctor.
    In fact, there are approximately 3,000 veterans waiting for 
care in Idaho and about two-thirds of those veterans are 
Priority 7 veterans. However, once in the system, I will tell 
you that Idaho veterans seem to be very pleased with the 
delivery of the care and the quality of service they receive. 
Now if that's compared to having received nothing at all prior 
to that, I can see why if they received any service it would be 
a tremendous improvement.
    So, anyway, as we explore ways to make VERA more conducive 
to addressing the health care needs of veterans, I think it's 
an important factor for us to look into the resource allocation 
equation and a way to provide the Veterans Administration with 
necessary resources to address the increased administrative 
workload so as to the reduce the extreme waiting time that 
veterans face to receive health care from the Veterans 
Administration.
    Again, Mr. Chairman, I appreciate your leadership and your 
focus on this problem, and I do hope that if not at this 
particular hearing but perhaps at a future one that we can 
interconnect with Medicare, Medicaid, and some of the other 
areas that would provide such resources and services to make 
sure that we are not just focusing on one avenue.
    Thank you, Mr. Chairman.
    Mr. Shays. Thank you very much, Mr. Otter. At this time the 
Chair recognizes John Tierney, from Massachusetts.
    Mr. Tierney. Thank you, Mr. Chairman, and thank you once 
again for having hearings that matter to all of our districts, 
and I want to welcome the witnesses and thank them for being 
here.
    Dr. Post, it's good to see you again. You were kind enough 
to come in fact to my district a couple of years ago where we 
dealt with many of these same issues. Unfortunately they remain 
with us.
    My remarks are going to be very brief because I associate 
with just generally all of the observations and complaints that 
have been made by my colleagues here.
    I do find it somewhat troubling that some of the officials 
at VA acknowledge that the Priority 7 veterans aren't counted 
under the current VERA system and then say that one of the 
reasons that they may not argue with that too much is because 
they are afraid that people will use that as an incentive to 
seek out more veterans in that category to increase to the 
amount of money that they get reimbursed. That is as troubling 
as when originally we put out a notice in our district that the 
Veterans Administration provided prescription drug coverage for 
veterans, and in a day 500 people called up looking for those 
services and the Veterans Administration said they were 
distressed that we had put the news out so generally because 
they weren't equipped to handle that kind of an influx.
    I mean the problem obviously here is that the entire system 
is not getting funded appropriately, and as Mr. Allen said very 
clearly, the idea that these people have served their country 
and they deserve to get what was promised to them and what we 
owe them so we need to have this whole formula reworked, we 
need to have the Priority 7s counted in and we need to have any 
other adjustments that need to be made occur. And I am just 
interested in hearing the testimony to make sure that we 
address these things, as well as the timeliness of those 
adjustments, so that people who are looking for the treatment 
now and people who are trying to provide the services are 
generally doing the best that they can under some very 
difficult situations are given the resources that they need to 
do that.
    So I thank you for testifying. I thank the chairman and my 
colleagues for participating in this hearing and look forward 
to seeing if we can't work together to resolve some of the 
issues.
    Mr. Shays. I thank the gentleman. At this time I recognize 
Mr. Putnam for any comments.
    Mr. Putnam. Thank you, Mr. Chairman. I appreciate your 
leadership on this issue and a number of other issues relating 
to the quality of care that our veterans receive. As I'm sure 
my colleague from Florida has pointed out, there are some very 
serious deficiencies in the system and fast-growing States like 
Florida where you have a tremendous inflow of veterans from 
around the country and old data that doesn't take into account 
the current numbers of patients in need of care in these 
rapidly growing States. We have seen some facilities grow at a 
rate as high as 40 percent a year. And so using timely data, 
recognizing the changes of migration patterns, and everything 
else is critical. So as they relate to the VERA formula in 
ensuring that we are running the most efficient system 
possible, that acknowledges and prioritizes those veterans in 
the greatest need of care in those States that have the 
greatest number of veterans, rather than trying to do an equal 
distribution just to keep the facilities open, I think should 
be one of the key goals of our system.
    So I look forward to hearing your testimony on this and I 
thank the chairman for his leadership on this.
    Mr. Shays. I thank the committee members for all their 
comments. I think I also want to thank the panel for waiting to 
be sworn in and listening to our comments. We obviously have 
some very real concerns and I think I will say that I have some 
regret that this committee has not had more hearings, that we 
have let so much time elapse, because we have all heard from 
the field what a terrible problem our veterans are faced with.
    I'd like to get two housekeeping things taken care of and 
then I will swear witnesses in and look forward to their 
testimony. I ask unanimous consent permit that all members of 
the subcommittee be permitted to place an opening statement in 
the record and that the record remain open for 3 days for that 
purpose, and without objection, so ordered.
    I ask further unanimous consent that all witnesses be 
permitted to include their written statements in the record. 
Without objection, so ordered.
    I ask further unanimous consent that written statements 
from the following organizations be inserted into the record 
after witness testimony: The American Legion, Veterans of 
Foreign Wars, Eastern Paralyzed Veterans Association, the Blind 
Veterans Association, AMVETS, and Disabled American Veterans.
    At this time I would like to welcome our witnesses. First, 
Dr. Robert Roswell, Under Secretary for Health, Department of 
Veterans Affairs, who will have testimony, accompanied by 
Jeanette Chirico-Post, Director of Veterans Integrated Service 
Network, and that's VISN 1, the Department of Veterans Affairs; 
and Mr. James Farsetta, Director of Veterans Integrated Service 
Network 3, Department of Veterans Affairs. Network 3 is New 
Jersey and part of New York.
    Mr. Farsetta. That's correct.
    Mr. Shays. And VISN 1 is New England. If you would rise, I 
will swear you in, and if there's anyone else that may be 
wanting to give testimony, just in case, it helps if I swear 
you in.
    [Witnesses sworn.]
    Mr. Shays. Note for the record all our of witnesses have 
responded in the affirmative. It is very nice to have you here. 
I would also want to say for the record that I know all of you 
care deeply about our veterans and are working very lard to 
serve them, so I'd like to think we are a partnership in this 
effort to figure out how we do a better job.
    So, Dr. Roswell.

  STATEMENTS OF DR. ROBERT ROSWELL, UNDER SECRETARY, HEALTH, 
  DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY DR. JEANETTE 
CHIRICO-POST, DIRECTOR, VETERANS INTEGRATED SERVICE NETWORK 1, 
    DEPARTMENT OF VETERANS AFFAIRS; AND JAMES J. FARSETTA, 
 DIRECTOR, VETERANS INTEGRATED SERVICE NETWORK, DEPARTMENT OF 
                        VETERANS AFFAIRS

    Dr. Roswell. Thank you, Mr. Chairman. I'm pleased----
    Mr. Shays. Your mic is not on, Doctor. I'm going to have 
you start over again.
    Dr. Roswell. Thank you, Mr. Chairman. I'm pleased to 
testify before the committee on the status of the Veterans 
Equitable Resource Allocation or VERA model. Mr. Chairman, with 
your permission, I will briefly summarize my statement and then 
be prepared to respond to the committee's questions.
    VERA was developed at the direction of Congress to replace 
an outdated historical-based allocation system. Since its 
inception, the VERA model has been developed to account for 
regional variances. For example, in 1997 a geographic price 
adjustment was introduced to recognize the impact of regional 
variations in the cost of labor. This year in fiscal year 2002 
the geographic price adjustment was extended to cover all 
contract costs, both labor and nonlabor and including the cost 
of utilities. The model also accounts for regional cost 
differences in accomplishing maintenance and repairs to 
facilities. Over the years the VERA model has been improved and 
enhanced to respond to changes in the practice of medicine and 
the delivery of health care services.
    Both internal and external groups, such as 
PricewaterhouseCoopers, the Government Accounting Office and 
Rand Corp., have reviewed the model. These outside reviews have 
acknowledged that the VERA model is basically meeting its 
objective of allocating available resources in a fair and 
equitable manner. Currently the Rand Corp. is evaluating the 
VERA model and will have a final report later this fall. The 
Rand study is addressing a quantitative analysis of improved 
case mix adjustment, geographic differences in prices paid for 
nonlabor inputs in contract labor costs, the impact of teaching 
and research programs and the impact of physical plants. We 
expect to receive the final report from Rand in October.
    We have also recently received recommendations from the GAO 
regarding improvements to the model. In its February report, 
GAO made 5 recommendations that are being evaluated as VA 
developed changes for the fiscal year 2003 VERA allocations. 
The Secretary of Veterans Affairs will make any final 
decisions.
    Some of the issues currently under review are how the model 
accounts for nonservice-connected and noncomplex care provided 
to Priority 7 veterans, adjusting complex and basic care price 
split to more accurately reflect actual costs of the two 
groups, and providing an additional allocation for the very 
highest cost patients, those whose annual cost exceeds an 
established threshold.
    My formal statements include discussion of all the GAO 
recommendations.
    While we continue to review and change the model to more 
accurately allocate scarce resources, we recognize that there 
will be a continuing need for a process for making supplemental 
funding adjustments. Over the 6 years that the model has been 
in use, adjustments have been made to assist networks that were 
unable to operate within their initial VERA workload-based 
allocations. This allows networks to plan their operations with 
more certainty of available funding. We need to better 
understand what is causing certain networks to require 
adjustments year after year. While it is possible that part of 
the cause may be the allocation model itself, the difficulty 
associated with eliminating excess capacity, adjusting the size 
of the work force, and shifting costly inpatient programs to 
more efficient health care delivery models may also be 
contributing factors.
    Mr. Chairman, this concludes my opening remarks. I'd be 
pleased to answer any questions you or the committee may have.
    [The prepared statement of Dr. Roswell follows:]

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    Mr. Shays. Thank you very much. I'm going to Dr. Weldon 
first, but is there a consensus right now that the system is 
broke?
    Dr. Roswell. Mr. Chairman, when you say the system, are you 
referring to the VA health care system or to the VERA funding 
allocation system?
    Mr. Shays. I'm referring to the fact that we have people 
who are literally waiting until someone else dies before they 
can be taken care of and I am just wondering--how would you 
define the system before we get to----
    Dr. Roswell. I believe that since October 1998, when the VA 
health care system was opened in accordance with statutory 
entitlement to all veterans, we have had an unprecedented 
demand for VA health care, a demand that has far out--has far 
exceeded our expectations.
    Mr. Shays. OK. And, rightfully so, you are putting a lot of 
the burden right back on our shoulders. We opened it up and you 
just couldn't, with the current resources, cope with it.
    Dr. Roswell. Mr. Chairman, I think there are economic 
considerations that we didn't anticipate when the system was 
opened in October 1998. But it is clear that more veterans are 
seeking care through the VA now than ever before and it has 
created an unprecedented burden on the system to the point that 
we have reached or exceeded capacity in many of our over 1,300 
locations nationwide.
    Mr. Shays. Let me start the questioning. What I would 
ordinarily do would be to give 10 minutes, but we have so many 
Members, I'm going to do 5 minutes this first round and if--I'd 
like the ability of a Member to go beyond 5 minutes to pursue 
something, but let's this first time just do 5 minutes. Dr. 
Weldon.
    Dr. Weldon. Thank you, Mr. Chairman.
    Dr. Roswell, the letter that I mentioned from the Bronx VA, 
I was just told by my staff that they again verified that was 
an accurate letter. How can we--and it was sent out by the 
Bronx VA. How can the VERA system be working when we've got 
42,000 veterans waiting to be seen in Florida and then we have 
another veterans' facility in another area of the country 
sending out letters encouraging people to come in?
    Dr. Roswell. Dr. Weldon, I think you pose a valid question. 
The VERA model, by its very nature, is an incentive-based 
model. More workload generates a greater allocation of 
appropriated resources. Recognizing that the appropriated 
resources for veterans' health care are finite----
    Dr. Weldon. Can I make a recommendation to you? I'm not the 
President. You can take my recommendation and throw it out the 
window. I know that. But I would recommend to all of your VISN 
directors to tell all of their hospital administrators don't 
send out letters like that because it absolutely drives people 
like me crazy. I mean I'm getting letter after letter after 
letter from veterans that just can't get in, and some of these 
guys are poor, some of these guys are really sick. You know 
this. You were the VISN 8 director. And then I have these 
veterans that moved from one location of the country down to 
Florida and they're furious. They were getting gold-plated 
treatment at their old VA center and now they can't even get 
their foot in the door and it's very, very bad policy.
    And let me ask you another question. These 42,000 who can't 
get even get in, are they included in the calculations for the 
next year's adjustment and the adjustment after that, or are 
they totally considered outside the system?
    Dr. Roswell. They are enrolled in the system, but unless 
they have received some form of health care, they would not be 
included in future year VERA allocations. However----
    Dr. Weldon. So the future--I'm sorry to interrupt you. I 
only get 5 minutes. I just want to make sure I understand this 
correctly. So the 42,000 who can't get an appointment in 
Florida, we are going to get no extra funds to help accommodate 
them for next year under the VERA formula; is that correct?
    Dr. Roswell. Not unless they received emergent care at one 
of our medical centers facilities where they are told they can 
go to receive such needed services.
    Dr. Weldon. OK. So if they have an emergency and they show 
up at one of the facilities in Florida under emergency status, 
then they are included in the counting. OK.
    I'm just curious. You have a VISN director from 1 and 3 
here; is that right? Can you just share with the committee how 
many people are waiting to be seen in the VISN you represent?
    Mr. Farsetta. It really depends upon the clinic that they 
are in. There are some clinics that are essentially closed. 
They are referred to an assistant facility. I think the 
advantage we have in New Jersey is our proximity. So you could 
be denied access to care in a clinic which you conceivably, if 
you wanted that care in that clinic, could wait 6 or 7 months 
but then we could refer you to a hospital which is within 
commuting distance.
    Dr. Weldon. Right. Or actually you could even just go 
across a river or a bridge and you could be in another VISN in 
some cases and get seen. But you don't keep track, in other 
words. My VISN 8 person told me we've got a backlog of 42,000, 
16,000 in central Florida. You don't keep a record of that----
    Mr. Farsetta. We do not have tens of thousands of veterans 
waiting for care in our network.
    Dr. Weldon. And you're in VISN 1?
    Mr. Farsetta. I'm in VISN 3.
    Dr. Weldon. And you're in--you need to push the button. I'm 
sorry.
    Ms. Post. In Network 1 right now we have a waiting list of 
over 8,000, and we have a capacity that's full at almost 85 
percent at all of our clinics and CBOCs.
    Dr. Weldon. Yes. That's what the gentleman from Vermont and 
the gentleman from Maine were referring to. Well, clearly we've 
got a problem. And thank you so much for your testimony. I 
appreciate it and I yield back, Mr. Chairman.
    Mr. Shays. Thank you. I would want to say parenthetically 
that I did not realize that Florida, your VISN, had such a 
backlog. I am absolutely dumbfounded by it. I thought this was 
more of a regional concern----
    Dr. Weldon. If the gentleman would just yield for a second.
    Mr. Shays. Sure.
    Dr. Weldon. And I say this for the benefit of all my 
colleagues on the committee. We did not accept all veterans in 
the State of Florida up until--Dr. Roswell?
    Dr. Roswell. 1998.
    Dr. Weldon. 1998. Whereas the rest of the country were 
taking all comers, we had refused and refused, but it was 
causing political problems within the veterans' system because 
these veterans were being eligible for care in the Northeast or 
Midwest and they were retiring to Florida and they being told 
we will not see you. So we were essentially told you've got to 
open it up to all comers, and in that 4-year period we've 
enrolled I think an additional 140,000 veterans in over a 4-
year time period.
    Dr. Roswell. 200,000.
    Dr. Weldon. 200,000.
    Dr. Roswell. The number has grown----
    Dr. Weldon. I personally think we need to divide Florida 
into 2 VISNs or maybe into 4 VISNs, considering the average 
VISN has about 100,000. But thank you, Mr. Chairman. I 
appreciate that.
    Mr. Shays. Thank you. Mr. Sanders, you have about 6 
minutes, if you would like.
    Mr. Sanders. I apologize. I'm going to have to leave very 
shortly to another commitment, but I want to applaud all of my 
colleagues, regardless of political persuasion, because I think 
we all agree that we have an enormous problem, and I would hope 
that we work together. Ultimately what this is about is that we 
adequately fund the VA and that we get a fair formula. I don't 
think there's much disagreement, and let's do it. I don't think 
there is a person up here who thinks that you tell a veteran 
who is sick that they can't come into the system because the 
United States of America doesn't have enough money. We make 
their lives very difficult because we ask them to do what they 
can't do with inadequate funding.
    I would just like to ask the panelists, I am looking at a 
chart and I just want to see--we're in VISN 1 here--if I have 
my numbers correct. My understanding is that between 1996 and 
2001, there was in terms of funding for VISN 1 a 21,502,000 
reduction in funding, which amounts to a 22.2 percent reduction 
in real inflation-accounted-for dollars. Is that consistent 
with your figures?
    Dr. Roswell. I'm not familiar with your figures. My figures 
show that in fiscal year 1996, VISN 1 was funded at $854 
million, that VISN 1 had a gradual increase, and this year 
received, including supplemental appropriations, $910 million 
for an aggregated percentage increase in unadjusted dollars of 
6.6 percent----
    Mr. Sanders. But unadjusted dollars makes the whole 
discussion irrelevant, doesn't it, because medical inflation is 
going off the wall. So let's toss that out. It's irrelevant. In 
fiscal year 1996, VISN 1 received $821,805,000. So let me just 
stipulate something and you tell me if I'm missing something.
    No. 1, in VISN 1, as I understand it, Dr. Post, we have 
seen in real inflation-accounted-for dollars, understanding 
that medical inflation is very high, a significant reduction in 
real dollars.
    No. 2, that would be bad enough, and please correct me if 
I'm wrong, if we were looking at the same number of patients, 
but if you combine that with a substantial increase in 
caseload, you're looking at substantially less money coming in 
trying to treat substantially more patients.
    Am I missing something or is that correct, Dr. Post?
    Dr. Post. I think that's correct, Congressman Sanders.
    Mr. Sanders. All right. Now, some people suggest that one 
of the problems may be that we have allowed Priority 7 people 
into the system. I am proud we have allowed Priority 7 people 
into the system, and I don't think anyone up here has to 
apologize for that.
    Now, I understand you guys are not the President of the 
United States and are not responsible for the budget, but I 
want to ask you a question. As medical people, you cannot, it 
seems to me, do your job well if you don't have the resources 
to do that. Why are you not coming before Congress and telling 
us the kind of money that you need so that we can adequately 
treat our veterans? Dr. Roswell, why aren't you--how much do 
you need? The Members up here are responsive. How much money do 
you need so that we don't have these ridiculous situations in 
Florida or Vermont or Maine? How much do you need?
    Dr. Roswell. I'm not sure I can associate a dollar figure 
with it. We clearly have a demand that has exceeded the current 
available resources and I think we need to seriously consider 
what the current demand for care, albeit unmet in some cases, 
means in a future year----
    Mr. Sanders. Dr. Roswell, that's not really a good answer. 
Why do you not have in your back pocket and say, look, to treat 
all veterans like the human beings they are, it's going to cost 
us ``X'' billions a year? I expect you would have that.
    Dr. Post, do you have some estimates for VISN 1?
    Dr. Post. I can only tell you what we've gone through in 
this last fiscal year. The shortfall that we faced in New 
England was over $80 million. We received a supplement early on 
or a VERA adjustment of over $40 million, and part of the issue 
for us as an organization is, as you said, the growth from, 
1996 to 2002 has been over 50,000 veterans. This is the first 
year that we have people in a cue waiting to get seen, and part 
of that is accessibility of care in New England. VA New England 
is one of the few networks where over 95 percent of the 
veterans have access to care within 30 miles of their home. So 
once it is opened, as you know, in Vermont, the veterans will 
come there. The problem for us as an organization as we have 
faced these shortfalls over the last several years is what it 
is that we do to meet those shortfalls. We've closed over 60 
percent of our beds, you've pointed out. We've decreased our 
work force by 25 percent. We have changed the delivery model in 
New England from an inpatient service to an outpatient model of 
care. We've done other consolidations and integrations that any 
additional ones will mean some closures within New England and 
that too then will be difficult for the veterans to deal with.
    Mr. Sanders. Mr. Chairman, let me just simply conclude by 
reiterating the point I made earlier. I would hope that under 
your leadership, this committee in a nonpartisan-type way can 
make a demand on the entire Congress and on the President to do 
the right thing. We are the richest country in the world. We 
can take care of veterans.
    Yes, Dr. Weldon.
    Dr. Weldon. If the gentleman would please yield.
    Mr. Sanders. Yes.
    Dr. Weldon. I work in the system and I can just tell you 
that one of the things we can do in this Congress to help our 
veterans more than anything else is to pass a drug prescription 
benefit plan for Medicare beneficiaries. These people are 
flooding the system to get their prescriptions for free and if 
we can could ever overcome the challenges we face there as a 
body and pass and sign into law a drug prescription benefit, it 
would be a huge help----
    Mr. Sanders. As one of the leaders in the Congress on that 
issue, I would tend to agree with you. Thank you very much, Mr. 
Chairman.
    Mr. Shays. Thank the gentleman.
    Mr. Otter, you have the floor.
    Mr. Otter. Thank you, Mr. Chairman, and thank you for your 
testimony, Dr. Roswell. As I said during my testimony, we've 
got 3,000 folks that are on the waiting list in Idaho right 
now. My understanding is that they have just been notified that 
they are on the waiting list and that's it. There's no medical 
purgatory for them, so to speak. There's no VA purgatory for 
them, and as my colleague from Florida read where there was a 
phone message that said don't call us, don't ask us where you 
are on the list, wouldn't it be helpful, at least encouraging 
for those that are on that list, if we had some sort of--if not 
the treatment and if not the analysis and the diagnosis and 
everything else, at least somebody to say to them, yes, you're 
moving up on the list, this is how important it is that we get 
you in?
    I'm just amazed that we can have that many people that are 
just sitting out there on the list. I don't think we'd tolerate 
that anywhere else. You know, I'm from Idaho and I would like 
to be put on the Environmental Protection Agency waiting list. 
I would love that. I would like to be put on the Army Corps of 
Engineers waiting list that they'll get to see me, but if we 
were to treat what we think are some problems on water and on 
land and on watershed in the West, if we were to treat that 
with the same urgency and the same alarm or if we were to treat 
our veterans in the same way, it seems to me like we'd make 
time, that we would make resources available.
    Is there something that we can do, that we can plug into 
the system that at least gives them some attention while 
they're waiting in line?
    Dr. Roswell. Well, it's an excellent question, Mr. Otter, 
and I agree with you. First of all, let me point out that to 
get on the waiting list they had to fill out an enrollment 
process form. It's an expedited form, but it does give us some 
demographic information. At that time everyone should be 
counseled on how they can obtain emergent care, should it be 
available, and as Mr. Farsetta spoke of, they're referred to a 
neighboring facility where capacity may exist. Certainly in 
Florida, even in Florida, with 42,000 people waiting, veterans 
are told if they have an urgent need for care, we'll provide 
the care. If something develops and if they need to be seen 
right away, we instruct them on where they can go. Most of the 
people are on the waiting list because they want to be enrolled 
in a primary care clinic at a location most convenient to their 
place of residence. It's not because they have an urgent need 
for care or don't in fact have access to care, but rather what 
we have seen over the last several years is lower priority 
veterans who come into the system and have Medicare benefits 
but would like to receive primary care and prescription drug 
benefits from the VA. Those aren't routinely provided until 
they can be enrolled into a primary care provider's panel.
    So I think there is a mechanism in place to identify an 
urgent need for care when--at the time they enroll and are 
placed on the waiting list.
    We also are developing a process and working internally 
with our clinicians to develop a mechanism to screen people for 
medical need during the time they remain on a waiting list. 
Obviously our concern is that someone who doesn't have an 
urgent need for care might develop such a need and might not 
know how to get that.
    Mr. Otter. We've had very good experience with the 
outpatient clinic from Boise to Twin Falls. I would like to see 
that happen in my district. Twin Falls is not in my district. I 
would like to see that happen perhaps in a few other places. 
But before I run out of time, I'd like you to respond to--the 
general counsel from the Veterans Administration has held that 
when a health center reaches the point that they cannot 
immediately accommodate all their patients, they can no longer 
give preference to Priority 1s over Priority 7s. It seems to me 
that is backward, that if I'm coming in with a service-
connected--which is a promise that I was made, that the 
gentleman from Vermont talked about several times and I am 
prior service, but if I come in with a rodeo injury and 
somebody else has got an Agent Orange problem, I would say that 
person should take priority over me.
    Are we having lawyers make these decisions rather than 
doctors? Is that our problem?
    Dr. Roswell. The general counsel only interpreted the law 
that was passed by this Congress in 1996, the Eligibility 
Reform Act of 1996, which essentially says that once enrolled, 
all veterans must be treated equally. The Secretary has the 
authority to determine eligibility for enrollment based on the 
availability of resources nationally, but once enrolled, all 
veterans, regardless, by law, by statute, must be treated 
equally. So it is the general counsel interpretation.
    Mr. Otter. Thank you. Thank you, Mr. Chairman.
    Mr. Putnam [presiding]. The gentleman from Maine, Mr. 
Allen.
    Mr. Allen. Thank you, Mr. Chairman.
    Dr. Post, I understand that contract costs for just one 
specialty service in VISN 1, invasive cardiac procedures, came 
to over $2 million this year. That's the figure I've been 
given, and I gather that 1 reason may be that there is a lack 
of acute care beds in Boston, which is obviously a referral 
center for Maine. Can you talk a little bit about contract 
hospitalization costs in VISN 1 and what do you think has 
caused the increase, what plans are in place to address the 
problem? If you could give us some sense of that, I would 
appreciate it.
    Dr. Post. It's a very significant problem for us, 
especially this past fiscal year. When we integrated the 2 
inpatient hospital facilities in the Boston area into 1, we 
reduced our beds even more. I used the figure before of coming 
down in our acute beds to about one-third of what we originally 
had. In 1996 we had something like 2,800 beds. Now we're down 
to about 900 beds. The issue is a domino effect, especially in 
the Boston health care system. We wound up moving all of the 
inpatient services to the West Roxbury campus in the last 18 
months or so, and we wound up combining a number of intensive 
care units. We don't have enough ICU beds and enough telemetary 
beds in the Boston health care system. We are in the process of 
designing and constructing some more of those beds. If we don't 
have enough beds there, then the backup happens in Maine and in 
Vermont and in Rhode Island of the patients that might feed in 
there.
    And another confounding problem for us in New England in 
the last year has been the new operating rooms in Connecticut 
where we also do open heart surgery. That had been delayed and 
finally opened up in the last several months. So they were 
behind as well in Connecticut where we can also do open heart 
procedures.
    Mr. Allen. Does that mean you think the problem will be 
eased next year?
    Dr. Post. It will be better next year once we get more 
telemetary and ICU beds in the Boston health care system and 
open up to full capacity the operating rooms in Connecticut. 
I'm not sure that it will resolve totally the issue because New 
England has a much older population. We have more veterans that 
are 75 and older, greater demand, and we have the largest open 
heart program in New England in all of the VA.
    Mr. Allen. Let me go to another issue about recruitment, 
about retention of staff. I want to talk--have you talk about 
the Network Resource Board. The critics of the board would say 
that the process of reviewing staffing requests by the board 
makes the process convoluted and cumbersome and creates what 
they call a hiring lag, and I am going to obviously want you to 
respond to this, with respect to two categories of employees; 
first, with specialists, medical specialists of one kind or 
another; second, with ancillary or support staff.
    We still hear in Togus that doctors are making appointments 
and nurses are washing beds, and they are doing things that 
lower-level employees would be more effective to have--cost-
effective to have lower-level employees handle.
    So the question is, how would you assess what the board is 
doing, and in terms how would--how would you talk about--how 
would you describe the general problems of recruiting 
specialists throughout New England VISN?
    Dr. Post. I think there are several aspects of dealing with 
the work force in New England. One, in certain areas we have 
great difficulty of recruiting people, as you know, in Maine, 
trying to recruit a radiologist, which I think went on for over 
2 years, trying to recruit. So that is one issue.
    The second issue--and part of that first issue is the 
availability of the specialists, and our ability to pay a 
comparable salary to that individual working for the VA, if he 
or she were in the private sector, what he or she might be able 
to achieve in that area. So that is one issue.
    And the second issue, and I--I actually have to address 
this as network director, the implementation of the network 
resource board to control, to better control our growth in 
numbers, and you know that I gave a commitment that anyone that 
needed to be hired would be hired with a phone call to me, and 
I have stood by that. Especially with the nursing shortage that 
we face in New England, you can't wait for the biweekly 
resource board to convene to have that. There has been a 
problem, I think, with the process itself, and we have pretty 
much ironed that out right now, so much so that within 24 hours 
of a meeting, I have those minutes and I approve them and it is 
done with.
    The other issue you asked me about was ancillary support. 
You can't continue to face the budgetary shortfall that we have 
faced over the last 6 years as a network without redesigning 
the systems and the delivery of care. And in some of that, then 
you lose some of those support staff, and so the decision of 
hiring the cardiac surgeon versus the housekeeper is a very 
difficult decision to make, and I have asked an 
interdisciplinary group in the resource board to assist me in 
making those decisions. The proof, though, is in the outcome. 
And the outcome for Network 1 has been--and it may seem small 
to some other networks--we have reduced our FTEE so far this 
area by 120, that is another 120. We will save about $5 million 
just in doing that alone and by implementing the Network 
Resource Board.
    It is a part of being an integrated delivery system, a part 
of addressing standardizing the care throughout New England, 
the same cardiac surgery program that exists in the support 
staff that we need in Boston and how it does exist then in 
Connecticut in support of the 195,000 veterans that we care for 
in New England.
    Mr. Allen. Thank you.
    Mr. Putnam. Thank you. It is illustrative to see the 
differences in perspective on this committee, and it gives us 
some insight into how difficult it is for you all to manage the 
system. It is not a--it is not a fight between the haves and 
the have-nots. It is a fight amongst the have-nots.
    But on that point, as someone from a State that has a 
42,000-case backlog, I would like to readdress Dr. Weldon's 
point as it relates to that backlog not counting toward the 
next year's enrollment or growth. Is that a change that must be 
congressionally motivated, or is that something that can be 
done from within the department?
    Dr. Roswell. The VERA model is not department policy, is 
not congressionally driven or mandated. Well, there is a 
statutory requirement that requires a VERA model, but 
development of that model is departmental policy. The dilemma 
is that--and one may say this is a Catch-22 situation, but a 
veteran who is on a waiting list and not receiving health care 
consumes no health care resources, and, therefore, a model 
which attempts to identify the cost of providing care to a 
veteran and index the reimbursement to the VISN based upon the 
cost-providing care to that veteran, would look at that veteran 
and say this veteran received little or no care and therefore 
the VISN is entitled to little or no VERA allocation as a 
result of that.
    I think the more important issue is how do we develop, 
expand the capacity to make sure that all veterans, regardless 
of service connection, regardless of priority, have access both 
to the care they were promised and the care they desire through 
the VA.
    Mr. Putnam. Well, but clearly there is some--there is 
some--there is already in place a mechanism to set some 
priority. And you have a situation, I mean, you have got a lot 
of smart people in your department. Surely you could come up 
with some base allocation for these patients who are on the 
waiting list to make future funding decisions, to get something 
in there to acknowledge that they are there. But pretending 
that they don't exist because they didn't actually walk through 
the door because they were waiting a year to get an appointment 
is absurd.
    We have, for example, also in place a policy that says that 
they must go to the hospital before they can qualify to go to 
an outpatient clinic that has been contracted with the VA.
    So, again, we have a situation in my area where we have a 
capacity at an outpatient clinic that is contracted through the 
VA of a thousand veterans. They have 500 in there currently. 
But, because there is a year to 15-month wait to get into the 
hospital, to get pre-clearance to go to the outpatient clinic, 
you have people who live down the street from an outpatient 
clinic, under capacity, but they can't go see it because they 
are waiting a year to go get entered into the system at the 
hospital in Tampa before they can come back and go down the 
street for health care.
    There has got to be a better way to do that. And in that 
particular case, it is not a matter of resources, it is a 
matter of bureaucratic hurdles that we can't find a way to 
input the person in the same in the outpatient clinic. They 
have to further bog down the waiting list at the hospital where 
people are in need of a higher level of care just to get in and 
get their paperwork processed.
    Could you please comment on that.
    Dr. Roswell. Well, it is a frustrating situation. I believe 
the clinic you are speaking of is what we call a contract 
clinic where we actually pay a capitation rate to the 
contractor who provides care to the veterans.
    Given the current limitation of resources in VISN 8, my 
suspicion is--I would have to verify this--is that Tampa has 
felt obliged to restrain the growth even though there is a 
budgeted amount restraining the growth in the contract clinic 
as a cost-avoidance measure to be able to get through the 
current fiscal year, given the huge demand elsewhere.
    To go back to your waiting list, we will certainly take it 
under advisement to look at a VERA process that would consider 
people on a waiting list. Let me point out that the VERA model 
currently has what we call unvested patients, who are patients 
who have been seen on 1 or 2 occasions but who haven't had a 
full and comprehensive physical examination, and there is a 
VERA allocation rate of $197 per year for those patients. My 
expectation is that a waiting list patient would be funded at 
something less than that, were we to move to that type of 
model.
    Mr. Putnam. One final question before my time expires. We 
had talked about some of the staleness of data in high growth 
States where you have got 40 percent growth. Is there a way to 
change the model that would include more recent statistics, for 
example, the last quarter of the previous year, and the first 
three quarters of the current year or some shift like that 
would be more timely? Is that a possibility?
    Dr. Roswell. It is possible. It is something that we have 
looked at in looking at a trailing four quarters of workload. 
As you probably know, the VERA model is based on an entire 
fiscal year's worth of workload, and we use the most recent 
complete fiscal year. We have explored looking at a trailing 
two or four-quarters model. There are significant logistics 
associated with that because the data base has to be closed 
out. In other words, each medical center and now each location 
of care, over 1,300 nationwide, would have to make sure all of 
the data is entered into the data base on a date certain to be 
able to close that out even on a quarterly basis. Failure to 
get all of that data into the system would unfairly penalize 
any network that didn't get their data into the system. So it 
is something that we have looked at. There are some significant 
logistics. But if our current rate of growth continues with the 
unpredictability we have seen in the last couple of years, it 
may become a necessity.
    Mr. Putnam. Thank you very much. At this time the Chair 
recognizes the gentlelady from California, Ms. Watson.
    Ms. Watson. Thank you, Mr. Chairman, for convening this 
hearing. America's war against terrorism requires us to once 
again call upon brave men and women of our armed services to 
risk their lives to protect America. They have taken a pledge 
to serve our country, to give their lives to protect our fellow 
citizens and our values.
    Our troops deserve no less than to have their country 
fulfill its pledge to them. But on that count, our Federal 
Government continues to fall short. We are the most prosperous 
Nation on earth, and our veterans should not have to go begging 
for adequate health care from our Federal Government, 
especially when they have been given a pledge that in exchange 
for the great price they pay, they would pay the small price of 
providing for their health care.
    Our veterans could be forgiven for thinking that they 
already fought enough. They shouldn't be forced to fight for 
the basic health services they were promised. The cruelest 
twist in this story is that our veterans are being forced by 
the Federal Government to fight their own brothers and sisters 
in arms; Connecticut vets pitted against their brethren in 
California; VA facilities in Newark pitted against those in 
Naples, Florida. And in the war to defend our veterans, this is 
the wrong battle. We should be talking about how to increase 
resources for the entire veterans affairs health care system 
rather than arguing over how the least few scraps are divided.
    Mr. Chairman, I would like to see the members of this 
committee leave this hearing with an increased appreciation for 
the strains we place on our veterans and their families when we 
fail to provide the necessary resources to the VA system.
    And one last observation. I can't help but believe that 
much of the increased demand for VA health services among 
Priority 7 veterans, those veterans without service-connected 
disabilities, is because of the increased cost of prescription 
drugs and the lack of an affordable coverage for those drugs. I 
believe that if we here in Congress commit ourselves to 
creating and funding a comprehensive prescription drug benefit 
plan, as has been asked for, it might relieve much of the 
stress on the VA. And I understand that the GAO will soon be 
investigating this very issue.
    In the meantime, I would hope that the VA does not look at 
Priority 7 veterans as a burden, but instead sees them for what 
they are, veterans who deserve the best care the VA can 
provide. And I would like to just suggest that we have VERA 
Priority 7. Have these different levels. And I really feel that 
we should strip the levels. Every one who has ever fought who 
is a veteran should be serviced, should be the benefit of the 
promises that we have made them.
    If we want to build a strong military, we have to keep our 
promises. So thank you, Mr. Chairman. And no further comments 
or questions.
    Mr. Putnam. Thank you, Ms. Watson. The chairman from 
Connecticut, Mr. Shays.
    Mr. Shays [presiding]. Mr. Chairman, I would like to just 
be kind of clear as a basis before we pursue these hearings 
further, and I am pretty certain that we are going to try to go 
to some of the VISNs before the end of the year and get a 
better handle.
    I am pretty certain, too, that Congress is as much a part 
of the problem, if not more, if we have required services to be 
provided and we haven't provided the resources, but then the VA 
system becomes culpable when they don't ask for exactly what 
they need, or it needs to do the job properly, because I mean 
it is self-evident.
    I had been led to believe that part of the problem we 
encountered was that some VISNs were getting more than needed 
and some were getting less. I was led to believe that within a 
VISN--I certainly have this bias that Connecticut has done a 
better job of controlling costs than the Boston area, and so 
that some of our resources went to an area that hadn't dealt 
with the cost savings the way we needed to. And I am aware that 
we have expanded the--those who qualify so to include more 
people.
    One of the things that I am wrestling with is, first off, 
so I would like you first, Dr. Roswell to tell me, where are 
the areas where we have the greatest problems and where are the 
areas where right now the resources seem to be adequate around 
the United States?
    Dr. Roswell. Thank you, Mr. Chairman. I agree with your 
premise that it is not an issue of some networks having excess 
resources. In fact, when we began the allocation process for 
the fiscal year 2002 budget, based upon the fiscal year 2002 
President's budget back early last summer, we had 18 of 22 
VISNs then identify an operating shortfall based on a projected 
allocation. 18 of 22 VISNs felt that their allocation would be 
insufficient to meet the workload demands based on our 
projections at that time.
    As it turns out, our projections at that time 
underestimated the actual number of veterans who would use the 
system this year. In fact, they underestimated the number of 
veterans using the system this year fairly significantly.
    For example, we projected a 25 percent increase in Priority 
7 veterans. The actual increase, fiscal year to date of 
Priority 7 veterans who are using our system, is over 50 
percent. So there is a huge demand. And yet our budget 
projections identified 18 of 22 VISNs with a shortfall. By 
applying management efficiencies, asking them to contain FTEE 
ceilings, employment ceilings, asking them to use collective 
purchasing agreements and other types of management 
efficiencies, all but five VISNs developed plans that would 
offset essentially all of their budget shortfalls. The 
remaining 5 VISNs did in fact receive supplemental fundings. 
Over $260 million in supplemental fundings was provided.
    Mr. Shays. But the shortfalls--saying that they have met 
their shortfalls would imply that they are providing the 
services that are required for the area and yet, you know, in 
Connecticut, I have veterans who tell me that basically they 
can't use the facility until someone dies or moves away. Those 
are the two reasons why there would be--and yet you would, 
based on your terminology, say that the hospital has no 
shortfall. The reason they have no shortfall is they have 
decided not to take more.
    Now nodding your head won't cover it for the record. So I 
need to know if that is--do you agree with that or not?
    Dr. Roswell. I think you have made an accurate 
characterization of the demand for nonemergent care in many, 
many networks, including your own district.
    Mr. Shays. So what you are really saying is that in some 
cases they were able to meet their shortfall, but then they 
were not able to take any new veterans. And so when you look at 
a budget, you might say they balanced their budget, but they 
basically didn't provide a service that was being demanded by a 
number of veterans. When I say demanded, that a number of 
veterans knocked on the door and they were told that they 
couldn't come in; correct?
    Dr. Roswell. You are correct. I would point out that 
virtually all--not virtually, all VISNs have sustained a 
significant increase in the number of veterans they are 
providing care and services to this year. But many have 
exhausted their capacity to treat additional veterans.
    Mr. Shays. Is that basically on the size of the facilities 
and the physical structure or the number of people and 
resources?
    Dr. Roswell. It is based on all of the above. In some cases 
we have locations, community-based clinics, where we have 
limited space that would accommodate 1 or 2 primary care 
providers. Once they have reached a certain panel size, a 
primary care provider simply can't manage any additional 
patients.
    So in some cases it is based on FTEE or employment. In some 
cases it is based on the physical capacity. In many cases it is 
based on the availability of resources. But I can assure you 
that there is no clinician that I have yet met, and I have met 
many of them in the VA health care system, who has time on 
their hands to be seeing patients who is not doing that.
    Mr. Shays. Say that last point again.
    Dr. Roswell. What I am saying is, we don't have clinicians 
who are able to treat any more patients than they are currently 
treating. Our staff are working harder, longer, more diligently 
than they ever had, in a Herculean effort to try to accommodate 
them.
    Mr. Shays. I guess what I am trying to understand, if we 
appropriate more money, will we have the space to service them 
if we hire more people, or are we at a capacity point? I mean, 
maybe our two VISN people could respond in their districts.
    Dr. Roswell. We actually have excess space in our medical 
centers. Where we have a shortage is in our community clinics, 
what we call community-based outpatient clinics or CBOCs. Those 
are leased facilities, though. Those are short-term leases. 
With additional money we would expand the number of providers, 
and in a number of cases, lease additional square footage to 
accommodate the increase in clinical provider staff at those 
locations.
    Mr. Shays. OK. Mr. Chairman, I understand you have to go. I 
am happy to have you just bring me the gavel. With your 
permission, I will give myself permission. I would like to--I 
would love to be able to do another round.
    Mr. Allen, if you would like to go--if I could just do 5 
more minutes, then I will just go directly to you. Is that all 
right?
    I--I want to just be clear on both VISNs. Do you have 
space? Do you both agree--it is community-based--if you both 
can respond. Are your community-based clinics at capacity?
    Mr. Farsetta. I would agree with Dr. Roswell. There is 
clearly capacity in our main facilities. In our community-based 
facilities, most of them are in leased space. The limiting 
factor, if it is leased space, probability of relocation or 
expansion is there. But the real limiting factor are people 
needed to provide additional care to patients.
    Dr. Post. I agree. I think that given additional resources, 
we would be able to hire more clinicians to see those patients 
in the space that we have.
    Mr. Shays. What is interesting is we didn't have those 
clinics a few years ago. And both Republicans and Democrats 
alike, working together, I think we took a great deal of 
satisfaction in the fact that people didn't have to go to that 
big facility and they could come locally. And what it strikes 
me as, did we basically create a market that didn't exist 
before? In other words, was there kind of this way of 
deselecting--not deselecting, but not selecting because people 
simply didn't use the service because they had to travel 40 
miles to get there and now the service is there it is great and 
they want it?
    Dr. Post. We have not mentioned in any way today----
    Mr. Shays. Is that a yes, first?
    Dr. Post. It is a yes for sure. But we have not mentioned 
the quality of care. Because once the veteran comes in, he 
receives high quality care as measured by a whole host of 
performance measures that are there for us to point to. We are 
even better than the private sector.
    Mr. Shays. Right. But the issue is, it strikes me in the 
past we had veterans who qualified who just didn't use the 
service. We made--we did what we should do. We said how can we 
better serve the customer, the veteran. In the process of doing 
that, we created veterans who said, hey, not a bad service, it 
is nearby, I am going to take advantage of this service. So 
that is one issue. Is that a yes?
    Dr. Roswell. That is correct, Mr. Chairman. Today 87 
percent of all veterans we serve live within 30 minutes of a VA 
clinic location. Part of the reason for establishing community-
based outpatient clinics was to make care more accessible. It 
was also intended and has proven to provide care at less cost, 
recognizing that care provided in a community setting is less 
costly than care in a metropolitan setting. What we didn't 
anticipate was the large number of veterans in lower priority 
groups who would opt to use VA for their health care benefits 
who previously had not done so.
    Mr. Shays. Now how many different groups of veterans do we 
have?
    Dr. Roswell. Currently 7 priorities.
    Mr. Shays. The seventh one being so-called the lowest 
priority, but they now qualify the wealthy nonservice-related 
veterans, correct?
    Dr. Roswell. Some would argue with wealthy. Living with an 
income for a single person about $25,000 a year, without 
compensable service-connected conditions. There are actually 
veterans in Priority 7 who have service-related disabilities.
    Mr. Shays. So 7 isn't wealthy, necessarily.
    Dr. Roswell. It is.
    Mr. Shays. Mr. Allen, you have a question. You need to go?
    Mr. Allen. I do have a question.
    Mr. Shays. You can wait. OK. So what I want to ask is, is 
any veteran getting a letter who is service-related, service-
connected, being told there is not a space available?
    Dr. Roswell. That is probably occurring for a veteran in a 
higher priority who has chosen, for whatever reason, not to use 
the VA system in the past, but in the current fiscal year is 
now seeking care for the first time ever. That veteran would be 
told----
    Mr. Shays. Why wouldn't that veteran jump ahead of all of 
the others, service-connected?
    Dr. Roswell. Because of the eligibility reform legislation 
passed in 1996 that requires us to treat all veterans equally.
    Mr. Shays. I can see you doing them based on income. I 
always thought that if it was service-connected, they would be 
first in the door. I always thought that. That is pretty 
surprising to me.
    Dr. Roswell. That has changed. That changed in October 1998 
when the legislation I referenced was implemented. That was the 
general counsel's opinion that the--the gentleman previously 
referred to which in essence says the law requires us to treat 
all veterans, regardless of priority, equal in assigning them 
to care once the Secretary has determined who can enroll in and 
receive the full health care benefits.
    Mr. Shays. But now everybody can enroll?
    Dr. Roswell. That is correct.
    Mr. Shays. So the service-connected veteran is not given 
any disability--is not given any advantage over the veteran who 
has a concern not related to his service?
    Dr. Roswell. That is correct.
    Mr. Shays. Mr. Allen.
    Mr. Allen. Thank you, Mr. Chairman. I will be brief.
    Dr. Roswell, I am wondering why the VA doesn't seem to 
adequately take account of staff COLAs or other predictable 
annual increases in the cost of care? In Maine it is heat. It 
can be prescription drugs. But every year those costs go up. 
And every year you have to struggle with, you know, trying to--
this situation caused by those cost increases. Is there some 
way to do a better job of predicting those increases and 
dealing with them up front in your budget, or is this--is your 
current process the best of all possible worlds?
    Dr. Roswell. I think there are ways to predict health care 
inflation which is, as you surmise, greater than the general 
inflationary rate. We have looked at actuaries to project 
workload. Changing economic projections have shown that our 
projections are less, our actuarial projections have 
underestimated the demand. Inflation and pharmaceutical costs 
particularly have risen substantially. But in the end I, of 
course, am obligated to support the President's budget request.
    Mr. Allen. I understand. I understand that. Thank you, Mr. 
Chairman.
    Mr. Shays. Thank you.
    Ms. Watson, do you have questions that you want to ask?
    Ms. Watson. No.
    Mr. Shays. Before we get to the next panel, I would like to 
just ask, have you--have the networks--I would like to ask both 
of our VISN folks, have your networks adjusted to the influx of 
Priority 7 veterans? How have you?
    Mr. Farsetta. I am not quite sure I understand the 
question. What we essentially do in our network is take care of 
all veterans who are seeking care as quickly as we possible 
can. Those that would experience long waits, we offer a 
referral to our main hospital. Those clearly who require 
emergent care, we recommend that they seek care in the local 
community or we move them to a, you know, to a VA hospital.
    We have experienced about a 27 percent in Priority 7 level 
veterans. They comprise right now about 37 percent of my 
workload.
    Mr. Shays. Is that based on their desire for prescription 
drugs?
    Mr. Farsetta. I think a percentage is. I think a percentage 
is related to the fact that the individuals who make I want to 
say 25 or $26,000 in the New York-New Jersey metropolitan area 
basically can't afford health care so they come to the VA; for 
whatever reason, whether they come for prescription medication, 
whether they come to see a podiatrist, whether they came to see 
an optometrist, or come to see a primary care doctor.
    Mr. Shays. Describe to me the benefits of prescription 
services for a veteran.
    Mr. Farsetta. The benefit of prescription for veterans is a 
veteran has to see a VA provider in order to get prescription 
medication. So if a veteran comes----
    Mr. Shays. Then the cost?
    Mr. Farsetta. The cost would be a $7 co-pay.
    Mr. Shays. No matter what?
    Mr. Farsetta. No matter what.
    Mr. Shays. No matter what the drug is?
    Mr. Farsetta. No matter what the drug is. If someone comes 
in for over-the-counter medication, it is 7 bucks. If someone 
comes in for a fairly expensive antiviral medication, it is $7.
    Mr. Shays. I had a number of veterans come to my community 
meetings in the last 2 weekends and one of them said to me, he 
doesn't--he has the ability to pay for his own prescription 
drugs. But he said he felt like he was not taking advantage of 
a service that was provided and so he said he then sought it, 
he said because it was so inexpensive compared to what he would 
have to pay in any other program.
    He said, I wasn't asking for the service, but I began to 
think that I was crazy for not utilizing the service because I 
am entitled to it. And, you know, I am just--I am not sure if 
we even do what Dr. Weldon said and make sure we pass the 
prescription drug, whatever we pass won't even come close to 
touching the benefit for veterans.
    Mr. Farsetta. There is no question, I think, that--I am 
only speaking for my network, that we fill a very real need as 
it relates to prescription benefit that is available to 
veterans. As I said earlier, for many veterans it may be the 
difference between eating and not eating, between taking 
medication on a regular basis and not taking medication at all.
    Mr. Shays. OK. Dr. Chirico-Post.
    Dr. Post. Let me just add one comment about how we in 
Network 1 have tried to meet the demand of the influx of 
patients seeking care with us because in New England I think it 
is a factor of the economy, and certainly in several of the 
States, many of the HMOs have failed, and so many of those 
veterans have then come to us.
    We in VA have been a proponent of something called the 
Institute of Health Care Quality Improvement to redesign the 
systems. And what has happened in New England is that, as 
Congressman Allen has said, in Maine they are coming in at a 
rate of 500 a month. The same is true in Rhode Island. The same 
is true in Vermont. So it requires a changing demand set to 
be--to change the delivery model and the CBOCs to meet the 
demand.
    Mr. Shays. Could you say that again in words that I can 
understand? I want you to totally start over. I want to 
understand what you are addressing. It is not your fault; it is 
my fault. I missed the first part of the connection. I was 
always like trying to catch up to you.
    Dr. Post. You asked how has the network met the increasing 
demand. You used Priority 7s only. I believe it is an increase 
in demand in--certainly in New England of all priorities. 
Granted, the greatest growth has been in Priority 7s. I added 
to that it may be a factor of the economy and the failure of 
the HMOs.
    The change in the delivery model by using a technique to 
change how we address seeing patients in the clinics to become 
more efficient is one of the ways that we have addressed that 
increased demand.
    Mr. Shays. Dr. Roswell, we have added billions of dollars 
each year to the Department of Veterans Affairs. How much of 
that--how many new dollars, though, have you gotten into the 
health care side? How much more do you have this year over last 
year and the year, and so on?
    Dr. Roswell. Let me ask for some assistance here to give 
you a precise figure.
    Mr. Shays. You were sworn in, correct, sir?
    Mr. Norris. Yes, sir.
    Mr. Shays. Bring a chair up.
    Dr. Roswell. Jimmy Norris is our chief fiscal officer.
    Mr. Shays. You just need to identify yourself and make sure 
you leave a card with the transcriber.
    Mr. Norris. Yes, sir. I don't recall exactly what--how much 
more we got this year. We did get a substantial increase over 
last year for 2002 in the medical budget. It was insufficient 
to meet the increased demand that we have expected.
    Mr. Shays. We are talking about $1 billion. And Everett 
Dirksen says, after a while $1 billion starts to add up to a 
lot of money. So we are putting billions of dollars of new 
money into health care, but we seem like we are really losing 
ground.
    Mr. Norris. Yes, sir. In the 2003 budget that is now being 
considered by the Congress, we have a substantial increase over 
the 2002 level, coupled with a cost-sharing proposal that we 
understand probably is not going to be approved. But we had 
attempted to identify a need above our current fiscal year 2002 
requirement of about $2.5, $2.6 billion.
    Now there are some new things in there that don't provide 
health care, accounting transfers. But I am thinking about $1.4 
to $1.5 billion of real increase in the 2003 budget request. 
Even at that, that was based on enrollment projections at the 
time that have been exceeded. So you are exactly right, we 
continue to be overwhelmed even in our best efforts to identify 
the requirements.
    Mr. Shays. The reason why I am asking this question is, I 
don't think any of us up here have the full courage to do what 
a--what would probably have to be done, short of just bringing 
in vast sources of money. It would be to start to try to decide 
which veterans should be first in line, who should be second in 
line, who should be third in line, and do it that way, to make 
sure those in the greatest need get the services, and I am 
wrestling with the fact that I have no concept, for instance, 
if Priority 7, how much of that is your total workload? But I 
would be interested to know. What is it?
    Dr. Roswell. Mr. Chairman, in fiscal year 2002 our medical 
care appropriation was increased by over $1 billion. However, 
on a $22 billion base, that billion dollar increase represented 
a 4.6 percent increase in the total available dollars. That 4.6 
percent increase had to bear the cost of the annual pay raise, 
it had to bear the cost of medical inflation and pharmaceutical 
inflation. The pharmaceuticals, as costly as they are, comprise 
an ever increasing percent of our health care expense. So you 
can see that $1 billion is a substantial amount of money, but 
$1 billion on a $22 billion budget----
    Mr. Shays. So what you are telling me--if they want to get 
on the next panel, if they want to jump in, feel free. I just 
want to establish this for the record. What you are basically 
telling me is that we need billions of new dollars each and 
every year into this system? I mean we are going to see more 
than a 4 percent increase. I mean that is fairly clear from 
your point.
    Dr. Roswell. Yes. This year, under open enrollment with 
that 4.6 percent increase that covered all of the costs I have 
described, our actual increase in veterans receiving care, 
fiscal year to date, is up by 18 percent. So you can see, Mr. 
Chairman, that with an 18 percent increase in the growth of 
users, and 4.6 percent increase in available resources, we have 
a trend that is not good.
    Mr. Shays. I am struck by the fact that if we gave you 
billions of dollars of new money, you would have to hire new 
people--I don't even think it is conceivable that you would be 
able to deal with that influx even with new money. It seems to 
me you are almost at a--you can only grow logically, there are 
only so many doctors you can hire, and you can only hire only 
so many nurses, only so many folks to do the services, it 
strikes me,I mean, and so it is--I am just leaving with this 
feeling that we have to do something on the other side of the 
equation. We are going to have to try to help decide who gets 
the service. I would think that if I were a veteran, which I am 
not, I would not want to be in front of anyone who had a 
service-connected disability. I would think that I would, you 
know, allow them to step in line in front of me. I would think 
most veterans would do that, wouldn't you?
    Dr. Roswell. I am a Priority 7 veteran myself. And you are 
correct. I don't feel it is fair for me to use the system. As 
proud as I am of the system and the quality of care provided, I 
try to--I don't use the system routinely for my routine care. I 
pay for it myself. So, yes, I do agree with you.
    I should point out that under the current eligibility 
reform legislation, Secretary Principi has the authority to 
determine if the system has insufficient resources to provide 
care to all priority veterans. In December of last year, he was 
prepared to close the system to new enrollment of Priority 7 
veterans. However, he was asked to reconsider that with the 
promise that additional supplemental funds would be 
appropriated to cover the costs of Priority 7 veterans for the 
remainder of this fiscal year.
    Mr. Shays. OK. Let me just ask you this question. We will 
close up. Do you want to jump in?
    Mr. Allen. Yes. I have just two things. One, a more 
technical point. My understanding is that with respect to the 
VERA allocation formula itself, Priority 7 veterans are not 
included. Is that true?
    Dr. Roswell. It is not entirely true. They are included for 
complex care, which is the most costly care, that pays an 
annual rate of $41,677. Also, if they are non-compensably 
service-connected, it is zero percent. They are included in the 
basic allocation. But the majority of Priority 7 workload, what 
we call the basic vested category, doesn't provide funds for 
Priority 7.
    Mr. Allen. So those people coming in for prescription 
drugs, say, and not much else, they are not counted in the 
allocation formula?
    Dr. Roswell. For the most part.
    Mr. Allen. The second point is since we have--you have done 
a good job describing the stresses on the system. I just wanted 
to--to ask you to reflect on the place of the VA health care 
system in relation to what is going on in the rest of the 
country. I mean, I--I do have a point of view here. What I see 
happening in Maine is that in very fundamental ways our health 
care system is breaking down. There is no individual market 
left in Maine worth describing. And the small group market, 
particularly for the small business community is--the rates are 
going up so fast over the last 3 years that people are not 
being able to buy health insurance the way that they could in 
the past.
    I just--can you talk a little bit about VA in relation to 
the--all of the stresses and strains in the rest of the health 
care system.
    Dr. Roswell. I think several members have alluded to the 
crux of the problem, as I see it. There are 9 million veterans 
currently age 65 and over. 93 percent of those veterans age 65 
and over are fully eligible for Medicare. However, as has been 
mentioned in this room today, Medicare does not provide a 
prescription drug benefit.
    Since October 1998, virtually all of those 9 million 
veterans who rely upon Medicare for their health care have now 
been eligible to receive care, including prescription drugs, at 
$7 per prescription from the VA.
    To date, almost 1 million of those 9 million are enrolled 
in and are currently receiving health care services through the 
VA. But until such time as a prescription drug benefit is 
available, we can expect continued growth from a million to 
something much closer to the total population of 9 million 
veterans who are Medicare beneficiaries.
    Mr. Allen. Thank you very much. Thank you, Mr. Chairman.
    Mr. Shays. You just said something that just heightens my 
concern. You said only 1 million of the potential 9 million are 
utilizing the very--almost nonexistent cost prescription 
service. I mean $7 is the cost. I have many, many constituents 
who spend thousands and thousands of dollars a year on 
prescription drugs. And if they happen to be veterans, they can 
go and it is a $7 co-pay; correct?
    Dr. Roswell. If we can get them assigned to a primary care 
provider, yes.
    Mr. Shays. If they get it.
    Dr. Roswell. Yes.
    Mr. Shays. As more and more people start to understand that 
they qualify for this extraordinarily inexpensive service, you 
are saying only 1 million of the 9 million have actually 
requested this service.
    Dr. Roswell. As of the end of last year, that is correct.
    Mr. Shays. So is there any estimate of what the cost would 
be if 7, 8, or 2 million did it, or 3 million did it? I mean 
the cost would just be mind-boggling. You are nodding your 
head.
    Dr. Roswell. I do agree with you. I think were that number 
to increase significantly, as it clearly could, based on our 
market share----
    Mr. Shays. It will.
    Dr. Roswell. It could be astronomical.
    Mr. Shays. I would just hope that we would develop a cost 
that would be a little more realistic. Obviously those who 
can't and don't have the resources, then I would want it to 
stay at this number. But it would just strike me that we got 
some real wrestling to do, don't we?
    Dr. Roswell. Yes, sir.
    Mr. Shays. Big time. I think this system is in a--is on the 
edge of cliff. And I think that we all know that it is.
    Dr. Roswell. I do agree with you, sir. The Secretary 
proposed in the 2003 budget proposal sent forward by the 
President that some of the costs be borne by a $1,500 
deductible. That has not been well received by the veterans 
service organizations or oversight committees. I think we 
recognize that there are other options that could be 
considered. Medicare subvention would be a mechanism to deal 
with this extraordinarily expensive care we are providing. 
Another mechanism to limit access to care would be a third 
possibility. But I do agree with you, something has to change 
because we are on a trajectory that we cannot sustain.
    Mr. Shays. You are not prepared for all of veterans to show 
up. That is the bottom line. And the way you are dealing with 
it is you are basically saying, until a veteran leaves or a 
veteran dies who is already in the system, we are not going to 
service you. And if that is the alternative, to--if--if that is 
what exists now, there is going to be a point in time where we 
are going to have to make some other very hard decisions, and I 
don't know if this Congress has the political will to do it. 
And I will include myself in that. But I do know I couldn't 
look a veteran in the eye and say this present system is 
serving veterans at all. And I know that we have to spend a lot 
more new dollars than we are. So I think you certainly know 
that, Tom. But, wow.
    Do you have anything you want to say before we get to our 
next panel?
    Do any of you want to answer a question that you thought we 
should have asked? I am being serious, I am not trying to be 
funny. Is there any question you were prepared to answer that 
you thought we really should have asked?
    Mr. Farsetta. The only point that I would like to make, I 
was just going to discuss what had gone on in our network----
    Mr. Shays. Why don't you ask--what is the question you want 
to answer?
    Mr. Farsetta. The question is, what impact has the 
reduction had on the infrastructure of your network?
    Mr. Shays. Good question.
    Mr. Farsetta. The answer is that in 1996, I started out 
with 176 buildings. I have reduced close to 4,000 employees, 51 
percent of my beds, 69 percent of my average daily census, and 
I still have 176 buildings. I still have 8\1/2\ million gross 
square feet of space. I still have 218 elevators. The average 
age of my buildings is, instead of being 44 years of age, is 
now 50 years old. 30 percent of my buildings are more than 70 
years old. If I don't shed my infrastructure, I can't possibly 
achieve----
    Mr. Shays. You are under oath right now. All of this has to 
be true.
    Mr. Farsetta. It is true. It is right here. It is all here. 
This actually was a physical assessment of my--the structures 
in my network.
    Mr. Shays. I am struck by the fact that we increased your 
workload, increased who qualified, but we also did something we 
all wanted to do, that was we had outreach so we created more 
potential customers. And I am struck by your community-based 
health care, your clinics are not--are turning people away. But 
I would like to think that if someone needed surgery, they 
wouldn't be told that they couldn't be serviced.
    Mr. Farsetta. The reality of the situation is that people 
who need acute care or urgent care, and I can speak for my 
network treaters, if they need surgery, they get surgery. If 
someone comes in with an acute condition, you know they have an 
acute situation, if someone goes to our community-based 
clinics, and has to wait, we would say if you think it is an 
emergency, either go to your local emergency room or go to a VA 
hospital and they will be seen immediately. We do that. We 
aren't saying to someone who needs surgery, well, we will see 
you a year from now. That is not the case at all. I don't think 
that is the case in Florida, either.
    Mr. Shays. Doctor, was there a question that you wanted to 
answer?
    Dr. Post. No, there wasn't.
    Mr. Shays. Dr. Roswell, just let me be clear on one more 
statistic and then we will be done here, unless you say 
something provocative.
    When you give the 1 million, 9 million, that just relates 
to prescription drugs?
    Dr. Roswell. Those are veterans aged 65 and older.
    Mr. Shays. So you are saying the entire system, not just 
those who could qualify for prescriptions. You are saying that 
basically you serve one-ninth of the potential veterans right 
now?
    Dr. Roswell. No. That is in the veterans aged 65 and older. 
Actually our total market penetration in the entire veteran 
population of about 24 million veterans is around 22 percent, 
23 percent. We currently serve about 4.6 million. But we 
anticipate we will serve 4.6 million veterans this year. 
However, many veterans have been ineligible for VA health care 
until 1998.
    Mr. Shays. Right.
    Dr. Roswell. Therefore, veterans age 65 and older who have 
had access to the Medicare, the CMS health care system, have 
not sought care through the VA, now that they are eligible and 
receive a full prescription benefit, they are coming to us in 
huge numbers. And that is where I expect our relative market 
percentage will go up. It is currently one-ninth. But it can go 
substantially higher.
    Mr. Shays. This takes my breath away.
    Thank you all very much. I appreciate your service to our 
country and to our veterans. And we know we have, in this side 
have a role to play that we clearly aren't playing.
    Thank you all very much.
    Out next panel is Ms. Cynthia Bascetta, Director, Health 
Care, Veterans Health and Benefit Issues, General Accounting 
Office; accompanied by Dr. James Musselwhite, Jr., Ph.D., 
Assistant Director of Health Care, General Accounting Office; 
and also testifying, Mr. Gerald Donnellan, Director of Rockland 
County Veteran Service Agency; Mr. John C. Bachman, Captain, 
U.S. Air Force, Retired; and Mr. Edward Burke, Co-chair, VA 
Connecticut Community Mental Health Advisory Board.
    I would welcome you all to stand.
    [Witnesses sworn.]
    Mr. Shays. OK. We will proceed as we called your names, we 
will do that. I guess, Mr. Burke, I am going to have GAO go 
first, because--just so you understand, GAO could request that 
they be testifying separately, but it is helpful to put the 
panel together. So we appreciate that. We understand, that is a 
request that we honor. Thank you for not making it.
    Ms. Bascetta. You are welcome.
    Mr. Shays. Thank you.

STATEMENTS OF CYNTHIA BASCETTA, DIRECTOR, HEALTH CARE, VETERANS 
    HEALTH AND BENEFITS ISSUES, GENERAL ACCOUNTING OFFICE, 
    ACCOMPANIED BY DR. JAMES C. MUSSELWHITE, JR., ASSISTANT 
   DIRECTOR, HEALTH CARE, GENERAL ACCOUNTING OFFICE; GERALD 
 DONNELLAN, DIRECTOR, ROCKLAND COUNTY VETERAN SERVICE AGENCY; 
 JOHN C. BACHMAN, U.S. AIR FORCE CAPTAIN (RETIRED); AND EDMUND 
  BURKE, CO-CHAIR, VA CONNECTICUT MENTAL HEALTH ADVISORY BOARD

    Ms. Bascetta. Mr. Chairman, thank you for the opportunity 
to discuss VERA with you today. We have heard a lot about the 
important issue of VA's overall budget, but I would just like 
to underscore that we are now focusing back in on the 
allocation model.
    Since 1997, this allocation system has done much to improve 
the equitable distribution of resources among VA's networks. 
This February, however, we recommended additional adjustments 
to better achieve the goal of providing comparable resources 
for comparable workloads. The problems we identified are not 
with VERA's design, but with its implementation. Its design is 
consistent with accepted payment principles, such as allocating 
resources on the basis of workload and adjusting allocations 
for factors beyond the control of management.
    VERA also provides additional resources from its national 
reserve fund to ensure that needed care is not jeopardized in 
networks that may experience financial difficulties. Today, 
though, our focus is on how VA could better implement these 
principles.
    First, as you have heard, except for those veterans in need 
of complex care, VERA does not account for most Priority 7 
workload. This made a lot more sense when VERA was first 
implemented because then Priority 7s were only 4 percent of the 
workload, and VA's expected cost-sharing and third-party 
collections were expected to cover most of their costs.
    But these veterans now make up 22 percent of the workload 
nationwide and, moreover, the proportion of Priority 7s by 
network varies from 14 percent to nearly 40 percent.
    VA projects continued rapid growth in this population, at 
least through the year 2010. To the extent that they are not 
funded in VERA, networks will continue to pay for most of their 
costs with VERA allocations made for service-connected and low-
income veterans.
    The second problem is the small number of case mix 
categories VERA uses to determine capitation amounts. Although 
VA identifies 44 patient classes, which have widely varying 
costs, VERA uses just three categories.
    Last year networks received about $120 for basic nonvested 
patients, about $3,100 for basic vested patients, and about 
$42,000 for complex patients. Consequently the cost range in 
each of VERA's three case mix categories is substantial.
    For example both ventilator-dependent care and home-based 
primary care are categorized as complex and receive the same 
capitation amount, almost $42,000. But the average cost to care 
for a ventilator-dependent patient was about $163,000, while a 
home-based primary care patient cost only $25,000.
    If VA used a better case mix adjustment and partially 
funded Priority 7 veterans, we estimated that $200 million 
could be more equitably allocated. More than 90 percent of the 
improvement resulted from better adjustment to case mix.
    Specifically, Boston, the Bronx, Pittsburgh and Nashville 
would have each received $32 to $41 million more if VA had 
refined its case mix adjustment. Under the same adjustment, 
other networks, Baltimore, Phoenix, Portland, San Francisco and 
Long Beach, would have received about $22 to $36 million less.
    Finally, VA has not used the supplemental process to 
improve VERA allocations in the management of VA's resources, 
even though the number of requests for supplemental funding and 
the amount provided through the national reserve fund has 
increased every year since 1999.
    To better understand budget shortfalls, VA needs to 
identify the relative contributions of imperfections in VERA, 
lack of network efficiency, inability to close or consolidate 
programs or facilities, and other factors.
    VA's inability to adequately explain its supplemental 
funding to stakeholders, particularly networks operating within 
their allocations, could erode their confidence in VERA.
    Mr. Chairman, as you know, VA concurred with our 
recommendations for improving VERA's implementation, but has 
expressed concerns about implementing them. Delaying these 
improvements, however, will perpetuate the inequitable 
allocation of millions of dollars. We believe that VA can and 
should use more case mix categories for its fiscal 2003 
allocation, as well as partially fund for all Priority 7 
veterans.
    As VA gains more experience, we would expect it to further 
refine VERA to incorporate more sophisticated ways to measure 
both case mix and workload.
    This concludes my prepared remarks.
    [The prepared statement of Ms. Bascetta follows:]

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    Mr. Shays. Can I just ask you a quick question? If they are 
turning people away at the door and not letting them show up, 
are they part of the formula, or are all of those people shut 
and not considered part of the formula?
    Ms. Bascetta. That was discussed earlier. The fact that 
there is a backlog is not factored into the formula, because 
the formula starts counting people who have actually received 
care.
    Mr. Shays. So how can we draw--I mean it seems almost 
irrelevant. That is why I went--this hearing--you are totally 
right. This hearing was about how we allocate it. The more I 
heard, the more I realized that is kind of like swallowing 
camels and straining out gnats. I mean I just am not--it is 
almost irrelevant in a way.
    Ms. Bascetta. Well, in a way I think that a lot of 
attention has been focused on VERA, perhaps inappropriately. 
VERA is the allocation model that is used once the budget is 
appropriated. We for a long time have looked at the overall 
budget, and we don't have a position on the adequacy one way or 
the other. But we do--we have seen over and over weaknesses in 
VA's budget formulation and execution.
    We would like to see a better budget justification for 
exactly what they do need. They are now undergoing the CARES 
process, which I am sure you are aware of. This is a process to 
estimate what veterans need and where those veterans reside so 
as to better align VA's infrastructure with those needs so that 
service delivery can be improved. Part of the impetus for the 
CARES process was some work we did a number of years ago where 
we found that----
    Mr. Shays. Let me just say, we will get into more of this 
issue. I just wanted to understand this one issue, though I 
mean it is kind of like--this is a very important issue, if it 
weren't for the fact that we don't have enough money 
appropriated, we don't have enough people, we aren't servicing 
a lot of the veterans who are basically told that they can't, 
you know, get the service. And some of those people may have 
real need to get it soon. And I am just struck by the fact that 
it would be really interesting, Congressman Allen, if we were 
able to have a frank assessment of what Congress, Republicans 
and Democrats alike, are going to appropriate, told the 
veterans organizations that obviously care and say, given--
which should be a lot more than we are doing now, but given 
that, how do you want this system to work? Because it is still 
going to work with a system that probably won't get all of the 
resources that it needs, but a heck of a lot more than it is 
getting now, hopefully.
    The issue will be, in my judgment, then, who should get 
that service. And who should at least be first.
    Mr. Allen. If I can just make a quick comment here.
    I do think that for--once you have a VA health care budget, 
the application of the VERA formula is a very big deal to 
certain districts, that--certain VISNs that feel that they are 
being shortchanged. Because that is the short-term problem. 
Every year people struggle with the actual budget that is in 
front of them and are trying to match expenditures and 
revenues.
    I think what this hearing has revealed is that both for the 
long term, for the VA health care system, and for the long term 
for the rest of America's health care system, those problems 
are huge. And they dwarf the problems of the--you know, the 
year-to-year VERA allocation issue. But somehow we can't 
neglect either one. We have to grow here with, you know, to 
some extent with the short-term issue. But the looming 
prescription drug issues are, in both the VA system and the 
health care system as a whole, are awesome.
    Mr. Shays. Mr. Burke, we are going to do something that 
only a chairman can allow it to happen. This individual, a 
witness who happens to be from Connecticut, gets to jump in 
line here. It is one of those privileges that I have. You are a 
Priority 1 with me.
    Mr. Burke. I am a Priority 7 with the VA.
    Mr. Shays. OK. Why don't you move the mic a little closer 
to you, and then we are going to let you leave when you have 
to. But we will get to the other witnesses.
    Mr. Burke. I would like to thank you for letting me do 
this.
    I didn't realize that I was as long-winded as I was with my 
testimony here, so I would like to sort of go through it and 
take sections out.
    Mr. Shays. That is the way to do it.
    Mr. Burke. Mr. Chairman and other distinguished members of 
the committee, I am grateful for this opportunity to present my 
views on the current state of VA health care delivery in 
Connecticut under the Veterans Equitable Resource Allocation 
Scheme.
    In my home State I currently serve as the coordinator of 
Veterans Services for the Department of Mental Health and 
Addiction Services. I would like to clearly state, however, 
that I come before you today as a concerned veteran and as co-
chair of the VA Connecticut Health Care Systems Community 
Mental Health Advisory Board and as one of two members of the 
VISN 1 Mental Health Community Advisory Board. I would 
appreciate your entering my prepared statement into the record.
    Last Tuesday, I met a homeless veteran in a public operated 
substance abuse treatment center. He was in the center's locked 
detox unit. His treatment plan called for him to continue with 
substance abuse treatment and a rehabilitation program after he 
completed his detox. He, however, had several serious physical 
concerns which made placement in rehab impossible. He had 
received care through the VA for many years in the past.
    I called the VA Connecticut ER, I spoke with the doctor on 
duty about the veteran's condition. As soon as it was clear 
that I was seeking admission for this veteran, I was told he 
couldn't be admitted because the hospital was on diversion and 
there was simply no beds.
    What do I say to this veteran who is coughing up blood, has 
irregularities in recent EKG, needs treatment for depression 
and substance abuse, and the VA has no beds?
    What do I say to the Korean War veteran who lives alone on 
an income that would entitle him to receive VA services at no 
cost? He goes to a VA hospital in Connecticut and is scheduled 
for surgery. His surgery is canceled or postponed 6 times--or 3 
times within 6 months.
    Finally, because his pain is so debilitating, he goes to 
his local non-VA hospital ER. Doctors find his condition grave 
and they perform the necessary surgery the next day.
    What do I say to these 2 and others like them? Do I explain 
the VERA system? Do I tell them it is too bad that we don't 
live in another region where the allocation is more favorable? 
Would that cure their ills or ease their pain? All I can say to 
them is I am sorry we can't keep our promise to you. Stories 
like these are made possible because in Connecticut we simply 
don't have resources needed to get the job done. Seven years 
ago VA began a dramatic transformation from being a hospital-
based health care system to a community-focused system. 
Promises were made back then.
    VA leadership went to great lengths to allay the fears of 
veterans when acute care psychiatric capacity was slashed from 
over 200 beds to 30. Soon thereafter PTSD and residential 
substance treatment programs were closed.
    Many of us were alarmed by what we saw. We spoke out about 
what we read as catastrophic hemorrhaging of resources, but VA 
reassured us. VA assured us that money being saved by 
reductions in patient beds and by curtailment of hospital-based 
services would be reinvested in community-based treatment and 
services.
    Today, after 5 years of flat budgets that annually drive VA 
Connecticut deeper into the red, the sacrifices of 7 years ago 
mean nothing. The promises mean nothing. Four years ago I 
walked into the best mental health services operation I had 
seen in 20 years in the business. It has been an infuriating 
exercise to witness and to have repeatedly argued against the 
steady decline in service capacity since then, and it has been 
gut-wrenching to witness the winnowing away of dedicated staff 
by attrition.
    Last year the community care center was awarded a 
compensated work therapy transitional residency grant. An 
exciting psychosocial rehabilitating initiative would provide 
transitional housing to veterans intent on improving their 
livelihood. Money will be turned back because no staff were 
available to run this program.
    During the VA Connecticut Mental Health Advisory Board 
meeting this past Wednesday, it was announced that the acting 
director now intends to reduce the Errera Center's budget by 21 
percent. That may force the center to close its doors for good. 
We are not going to stand for it. Do we have to do another 
Veterans March on Washington?
    In closing, I would like to offer two observations. I want 
to tell you that in the face of all of the problems and 
frustration, there remains at VA Connecticut a cadre of 
dedicated and talented staff that keep the whole thing going 
through their sheer creativity, love, and sheer determination.
    And the other point is this. In the decades of uncertainty 
in this world during our lifetimes, throughout the many seasons 
of ambiguous and often dangerous conduct of nations, we instill 
in our sons and daughters ownership of a patriotic notion that 
military service is a noble endeavor, indeed a personal 
responsibility.
    We in turn place our faith and trust in them, our young men 
and women in uniform, that this fundamental relationship is 
mortised by our pledge to care for those we send in service in 
our name.
    Members of the committee, I implore you to do all that you 
possibly can to restore fiscal health to the VA Connecticut 
health care system in New England, and quickly. America has 
broken its promise to its veterans and it is time to change 
that and ask more Americans to do their part to volunteer and 
enlist and become active duty.
    We depend on you to keep the government's part of the 
bargain. Put the financial funding behind the words. Don't 
abandon our veterans. Don't abandon the American people. Thank 
you.
    [The prepared statement of Mr. Burke follows:]

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    Mr. Shays. Thank you, Mr. Burke. I am tempted to try to let 
you get out of here soon so you don't race to the airport by 
just asking you this question. What you are saying, basically, 
strikes in--in the face of what we were told about how if it is 
surgically necessary, no one is turned away. I mean you have 
personal experience where it is surgically necessary, and they 
are turned away.
    Mr. Burke. Yes. I think care should be based on clinical 
need. I think that is an important consideration. I think 
anyone who comes into a hospital system, Priority 4 treatment 
has to be clinical need. Those who need the services the most 
should get them first.
    However, what I have seen over the past 4 years is that 
because of the influx in veterans coming in, and the--the lack 
of resources, and the attrition rates, there is just not the 
staff available to provide services. And the numbers that I see 
are critical. They are really critical. I don't know really how 
VA can continue to do its job under the restrictions the way 
that they are.
    Mr. Shays. Mr. Allen, do you have any questions?
    Mr. Allen. I do.
    Mr. Shays. Let me just say to you I think that it probably 
would make good sense for you to get on your way so you don't 
rush to the airport. But I would tell you, and I think it's 
self-evident, that there is a problem that both Congress and 
the administration need to resolve together, both Republicans 
and Democrats.
    And my request would be veterans can demand certain things 
because of our respect for veterans and their service, but I 
hope that veterans are able to make an assessment of the 
conditions that exist to see how we can improve it in a way 
that brings some quick results.
    And what I'm suggesting by that is, I'm not sure that 
Congress is going to appropriate all that we need, but I do 
think it's fair to say we would be inclined to do more than we 
were anticipating we should, and more than maybe even the 
administration feels we have the capability to do. So I think 
there will be some real interesting floor debates on the 
budget, but in the end, there's still going to be some 
rationing that probably is going to happen. It would be nice if 
the veterans could help us decide how we do that, with the hope 
that eventually we don't have to ration anyone. But right now 
what's happening is people are being shut out. And even if 
they're service connected and even if they are frankly in acute 
need, a very real need, they're being shut out. And some others 
may be in the system that would probably--if they knew, would 
be willing to let others step in.
    And there may even be a need, frankly, to look at the 
prescription drug issue and saying should more be asked of the 
veteran, given that the benefit of that veteran's service is a 
heck of a lot better than the alternative. Even just a little 
bit of an increase or a copayment. It would seem to me the 
veterans would want to do that.
    Mr. Burke. I agree with you. In fact, the co-pay just went 
from $2 a prescription to $7 a prescription just recently. I 
also am a category 7 veteran. I am enrolled in the VA health 
care system. I have no intentions whatsoever of using the VA 
for prescription drugs or for services. I don't need it. I 
think there are a lot of category 7s that are like myself.
    Mr. Shays. But it's hard to turn down if you think in one 
case I might have to pay $1,000, and in another I could do it 
for 50 or 25. That's a tough decision, because that's real 
money.
    Anyway, you travel safe. We look forward to working with 
you.
    Mr. Burke. Thank you. Thank you very much.
    Mr. Shays. Mr. Donnellan.
    Mr. Donnellan. Thank you. My prepared statement----
    Mr. Shays. Do you have your mic on, sir? I don't know if 
you have your mic on. You have such a nice voice you almost 
don't need it.
    Mr. Donnellan. Is that better?
    Mr. Shays. Yeah. That's good both ways.
    Mr. Donnellan. As I understand it, the concept of VERA is 
to shift VA funding south and west, based on the fact that our 
veteran population from the Northeast is retiring and moving to 
warmer climes. On the face of this, it makes sense, however; 
looking further into the situation, there are important 
questions to be considered. For instance, should we be more 
concerned about the veteran who is well enough off to retire 
than his less fortunate comrade who can't? The retired veteran 
would seem to have more financial stability. Further, a move to 
Miami or Phoenix, their buying power would increase 
dramatically because of the decreased cost of living.
    Based on the current Consumer Price Index, a veteran with a 
$30,000 income moving from New York would see a 54 percent drop 
in his cost of living. Conversely, a person moving from Phoenix 
to New York, based on the same 30,000, would need 130.9 times 
the income.
    So you ask, why do any veterans stay in New York? There are 
many reasons. Some simply can't afford to move. Others are tied 
to the land. Others are afraid to change, reluctant to leave 
children, grandchildren. Some rely on family support. Some have 
moved and returned.
    However, in order to survive in New York, many cannot 
afford to retire. Adding to this problem, earning an adequate 
living in New York, can put you over the means test of the VA. 
In simple terms, this means the veterans are hit doubly, 
considering they also have to have a copayment for VA medical 
care, which they may not have to if they live in Miami or 
Phoenix where the cost of living is less and they may not have 
to continue to work and could obtain free medical care. Cost of 
living also cuts into the operation of the VA hospitals in 
terms of attracting employees.
    Based on the same statistical information, New York housing 
costs are four times greater than they are in Phoenix or Miami. 
Food and groceries are roughly 40 percent higher. Utilities, 70 
percent higher than in the other two locations. It doesn't come 
anywhere near advantageous for health care professionals to 
relocate to New York.
    One of the points I am trying to make is that a veteran--
the veterans who are staying in New York are more likely to be 
in need of care and less likely to be able to obtain it.
    Also, we need to look at the VA hospital system in the 
Northeast that serves as a backup. The reality is we will 
become involved in a war soon. Also the events of last 
September saw the VA system serve as a backup for terrorist 
attack. Unfortunately, both the VA and the Department of 
Defense have reduced their bed space approximately 60 percent 
since 1993. At this point, VA estimates that in a mass casualty 
situation, within 24 hours they could have 3,200 beds 
available; 72 hours, 5,500; in 30 days, 7,500 beds. However, 
while the VA does have the excess beds and space, it does not 
have the staff to activate these beds. Therefore, we may be 
putting more than veterans in jeopardy.
    Another point to underscore the need for medical care in 
the New York area: A few years ago, working with Rockland 
County, the Department of Veterans' Affairs hospital at 
Montrose opened a VA clinic in Rockland. At that time, there 
were 250 veterans using the outpatient services of the VA. 
Since that clinic opened only a few years ago, the number of 
veterans served has jumped from 250 to 6,000. I feel this works 
both--works to the advantage of both the Department of 
Veterans' Affairs in terms of cost savings and the veterans in 
terms of convenience. However, these clinics are becoming full. 
The veterans are being shifted back to VA hospitals which is 
more costly for the VA and less accessible for the veterans.
    There is another plan that may help us leverage some funds 
not only for the veterans in the Northeast but veterans across 
the country. It is the Enhanced Use Leasing program, 38 U.S. 
Code, section 8161, which was first passed by Congress in 1991. 
At that time, the maximum time to lease VA property was 35 
years to bring private funds into the VA and reduce the cost of 
operation. Larger projects could not be financed over that 
short period of time. However, in 2000, Congress wisely 
extended this authority to a possible 75-year lease. There are 
local projects under consideration whereby private corporations 
could lease VA land, develop housing that would go from 
retirement to supportive to nursing care for our veterans. In 
this way, underused VA property could be taken off the books of 
the VA and provide an income stream.
    This project is now being discussed in relation to the FDR 
VA hospital in Montrose, New York, but I feel has a positive 
national implication.
    In closing, I would like to say that I always knew living 
in New York was more expensive. However, until doing the 
research for this testimony, I didn't realize just how 
disproportionately high the cost of living in that area is 
compared to other very nice areas in this country.
    I encourage the committee to consider restoring as much 
funding to the Northeast as possible. Even if funds were evenly 
distributed, New York is still so far behind the curve cost-
wise that it isn't fair to the veterans in the area. Cutting 
back on VA services in the New York area jeopardizes the well-
being of not only our veterans but our military in case of war, 
and our population at large in case of terror attacks. Thank 
you very much for your time.
    Mr. Shays. Thank you very much for your time and your 
service to our country.
    [The prepared statement of Mr. Donnellan follows:]

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    Mr. Shays. Mr. Bachman.
    Mr. Bachman. Congressman Shays, members of the board----
    Mr. Shays. Is that on?
    Mr. Bachman. Is that on now?
    Mr. Shays. It just was too high. Thank you.
    Mr. Bachman. Chairman Shays and ranking members of this 
board, I'd like to thank you for your leadership in allowing me 
to come here this evening. I also want to express our heartfelt 
thanks for myself and the many million veterans to Congressman 
Tom Allen for his steadfast efforts he put forth for veterans 
over the years. Tom is Maine's point man on veterans' issues as 
the only member of the Maine's congressional delegation to ever 
meet with my committee. And we are fortunate for having Tom as 
a Congressman. We greatly appreciate your leadership, sir.
    I would also to thank Congressman Allen's senior field 
advisor John McLaughlin for his effort and all his time he has 
spent with my committee, and John has gone well above the call 
of duty to help us.
    Finally, I'd like to thank not least, but my wife Mary, for 
who next week she and I will celebrate our 30th wedding 
anniversary, I want to thank her for her love and support over 
these many years.
    Now for the crux of the matter, sir. As you all know, my 
name is John Christopher Bachman. I'm a retired Air Force 
captain. I've served 2 years of combat duty in Vietnam with the 
U.S. Marine Corps. I'm a category 1 veteran. I'm a physician 
assistant. I've been in that position for 22 years. I am also 
the local line manager for the spinal cord injury clinic at the 
Togus VA. I want to tell you the VERA system, even though 
people do not like to hear it, has failed; and Togus has become 
a casualty of that failure. We have heard lots of people talk 
about different things today. I want you to know that the 
Veterans Administration probably takes great pride in the fact 
that they've cut 50 percent of our beds; 52 percent of our beds 
they have cut. And they stand there saying that's a great 
opportunity. They've cut staff.
    As we go through all of this and we hear all of this, no 
one has come up with a solution to you or this committee. 
Hopefully I can provide that for you from the grass-roots 
opportunity of practicing medicine over the past 15 years with 
the Veterans Administration. As we deal with this each and 
every day, we see more and more veterans coming into Togus, and 
probably the rest of the country, and understand that Togus is 
just a small portion of what must be happening across the 
United States.
    As we cut those beds and as we've heard people say there's 
more and more of our veterans becoming older and we're 
practicing medicine on an outpatient basis and in CBOCs--and 
Maine has quite a few CBOCs--those veterans still come to 
Togus, they still travel an enormous amount of time, as I 
related the last time I was here. But the thing that I think no 
one has addressed when we ask for money is that we never give 
Congress each and every year what it takes to supply the 
Veterans Administration with money. And I think VERA fails in 
that.
    To give you an example of just a small thing that happens 
at Togus because of the lack of funding, the lack of personnel, 
and the lack of beds that are in this small facility, we do a 
thallium stress test on people. We did between 150 and 200 of 
them last year. If we had the money to do the test and the 
personnel, which we do, and we have the equipment sitting there 
already at Togus, it would cost us $250 per test. But we farmed 
out between 150 and 200 tests last year at $2,800 a test. That 
means we could have saved Togus over $300,000 for a test. How 
many facilities across this country can do that?
    You know, we talk about going to the community. I want 
someone to address to this grass-root provider how much money 
we can save by doing the tests within the Veterans 
Administration. You ask how much it would cost. Probably it 
would cost the Veterans Administration to function every single 
year, by what the GAO's report said, $4,729 per veteran 
regardless of their category, and 4 percent of them getting 
$42,000 being COMPLEX.
    The other issue we heard today was in respect to category 7 
people being wealthy, I think I heard the term. I'd like to 
know how that is wealthy. In Maine I think the Veterans 
Administration counts not so much their home but what their 
retirement was, what they're getting from retirement. We're 
talking about individuals who are 65 years old, who have worked 
very, very hard all their lives. And now they can't afford 
those medical costs anymore; not just prescriptions, just 
regular medical costs out there in the community. And somebody 
says to them, come to the VA. That's where they end up. That's 
what we're getting. It's not an abuse.
    If you think about it, you heard somebody say there were 24 
million veterans in this country who have served this Nation, 
and we serve 4 million only. Why aren't they in there? Somebody 
tells me, why aren't they in there? I'll tell you why. It's--
for myself, I don't use the Veterans Administration, even 
though I'm a category 1. And why don't I use it, like most 
other veterans don't use it? The service-connected veterans get 
it right up front. They were injured. They deserve it. They got 
hurt defending this country. Everybody else served the country, 
but in the back of their mind we promised them that we would 
take care of them. And they worked, they had their own 
insurances, they went about--and for some reason they lost it. 
That's why we have 44-plus million Americans without health 
care insurance. And somewhere along the line somebody says, use 
the VA.
    That's why we came. The VA is the safety net in this 
country for our veterans. We all need to remember that. It's 
not going to cost us billions and billions of dollars. And the 
cost needs to be delivered by what waste we're doing first. If 
we can provide this service within the facilities cheaper than 
the outside, we need to look at that.
    The other thing that's very, very important to me at 
heart--and sometimes I get wrapped around this--is that up 
there in Togus, you know, we're far, far away. We never 
consider the geographic ability of how far it is when you say 
to somebody, go to Boston. Well, when you go to Boston, 
Congressman Shays, you and I have had this discussion, you live 
in Madawaska, you got a 12-hour drive to get to Boston. If 
you're sick, do you want to drive 12 hours?
    And for another thing that happens that we do, that was 
addressed here today, someone talked about going to the 
emergency room and needing hospitalization. Well, I work in an 
emergency room part time. I work almost a full-time second job. 
I work at Maine General Medical Center in the emergency room. I 
have had to tell veterans that they can't go to Togus. I've 
called my own facility and been told no beds, where that 
evening when I went to work, I walk through the ward and there 
was beds, but we filled them with veterans who are sometimes 
just there for an overnight procedure. We need another way of 
filling--those beds need to be filled by people we need.
    And something that didn't get told to you people sitting up 
there is when that phone rings and they say go to an emergency 
room, if that veteran is not category 1, 2, or 3, he buys the 
cost of that emergency room visit himself. And the majority of 
category 7 veterans cannot afford that. That's what we need to 
do. That's a waste. Thank you.
    Mr. Shays. Thank you very much.
    [The prepared statement of Mr. Bachman follows:]

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    Mr. Shays. We've been joined by Mr. Gilman. But I want you 
to catch your breath a second. I'm going to let Mr. Allen just 
ask a question, too, so you can catch your breath. Mr. Allen.
    Mr. Allen. Just quickly, Mr. Bachman, I want to, because I 
know you have opinions on this, I want to just ask your opinion 
about how you think Togus is being managed by the current 
administrator Jack Simms and his staff? I mean, because there 
is no question that for every one of these facilities, one of 
the things that needs to be done is to look at how each 
facility is being managed. I just would like your opinion on 
that.
    Mr. Bachman. Mr. Simms and I have had our disagreements in 
the past. And Congressman Shays and you understand, him and I 
went to war a few times. Mr. Simms at the present time, I would 
say, has come around to the fact that he's pulling for the 
veterans as much as possible. The problem that Mr. Simms is 
having is that, as I look at it now as a line manager, he has 
been painted into a corner and been micromanaged by the VISN 
level. I think that's the problem that probably occurs 
throughout most of the VISNs in the United States. They were 
created initially to be giving advice, as I thought, and to be 
minimally staffed. And I think if you look at it, they've 
probably grown tremendously, and now they take for themselves 
and leave what's left over for the outlying facilities. That's 
why probably Maine is in one of the problems it is, sir.
    Mr. Allen. Another question. You mentioned the thallium 
stress test as an example of how the facility could save money 
if you were using it to the fullest extent. Are there other 
ideas you have for ways to make the delivery of health care to 
our veterans more efficient?
    Mr. Bachman. Yes, sir. Probably we spend at Togus, I don't 
know what everybody else spends, but we spend a little over 
half a million per year on MRIs that we ship out to the 
community. If the facility itself had an MRI, probably in 2 
years you'd pay for that machine itself, and then you'd end up 
reaping the benefits from that.
    Other things that we farm out, a lot of gastroenterology, 
cardiology. One of the laughs between the medical staff now is 
to get your waiting times over 1 year. That way, everybody who 
is over the 1-year period can be farmed out and at least get 
care on a quicker basis. In my own department, the chief of 
neurology, Dr. Salmon Malik, has a waiting time--if you called, 
sir, we would probably get you in in March 2003. So we're not 
meeting the 30/30/20. I don't think we've ever achieved that, 
in honesty.
    Mr. Allen. Thank you.
    Mr. Shays. Thank you.
    Mr. Gilman is here. And I'm reminded seeing you, Mr. 
Donnellan and Mr. Gilman, that we did a hearing up in Mr. 
Gilman's district. And during the course of that hearing, the 
room was packed, one of the police officers came up to me and 
he said, Mr. Chairman, you may need to escape out the back 
door, and I just want to show you where it is. And I felt that 
it was a rowdy group, candidly, but when he made that comment, 
I thought I had to fear for my life. It was a very memorable 
hearing.
    Mr. Gilman. It sure was, Mr. Chairman.
    Mr. Shays. You notice we've not had another.
    Mr. Gilman. Mr. Chairman, I want to thank you for holding--
--
    Mr. Shays. I want you to turn on your mic.
    Mr. Gilman. We're on. I want to thank you for reviewing 
where we're at to examine the current state of veterans' health 
care, specifically how it's impacted over the last 6 years by 
the Veterans Equity Resource Allocation, the VERA formula.
    Apologize for being late. I had to be up in the district, 
testifying in the court on a little matter called 
redistricting.
    I also want to welcome our director of----
    Mr. Shays. Do they know that you're a former veteran?
    Mr. Gilman. I hope that they recall that. I try to remind 
them that age shouldn't be a factor.
    I also want to welcome our director of Rockland County 
Veteran Service Agency who's been doing an outstanding job in 
our 20th district, Jerry Donnellan, who also was present at 
that raucous hearing as well. This is an old and familiar 
subject for both of us, Mr. Chairman. And I'm certain that we 
all recall that raucous field hearing. And I can't thank you 
enough for coming up to our district at that time, and we felt 
so badly the way some of those folks had reacted, but they were 
hurting. That was the summer of 1997. And you did an 
outstanding job then of controlling that hearing and keeping 
things and moving along.
    At that time, you and I were both concerned about the 
impact that VERA would have on the veterans in our part of the 
country. And at the same time, we were also assured by the VA 
that the best way to keep money in our respective States was to 
get veterans registered for VA services. And we all went to 
work on that. We did our part in that arrangement. But 
regrettably, the VA did not fulfill their responsibilities.
    The VA's proposal that bringing in new patients would 
preserve VISN funds was questionable due to the fact that most 
of the new enrollees in New York would be category 7 veterans. 
Nevertheless, we stressed to our local veteran service 
coordinators that a greater registration for VA health services 
was required, and in fiscal year 2001 VA health services usage 
in our own area grew considerably. And despite this, VISN 3 
continues to lose VA funding each and every year.
    The veterans in the Sun Belt are receiving the exact same 
type of treatment as their northern counterparts, but in their 
case the costs are covered by the VA, whereas in New York they 
are not. Since VERA attracts noncategory 7 spending, that 
formula results in the shifting of funds south and west, solely 
because those areas have a lower cost of living and fewer 
specialty care patients.
    This problem is not mitigated by increased overall funding. 
Congress has provided record increases in VA health funding 
since 1999. Yet, due to the existence of VERA, very little of 
the new money ever flows to the Northeast. Instead it goes to 
the Sun Belt to treat means-test eligible veterans in VERA-
friendly regions, while the administrators of VISN 3 and other 
northeast networks have had to call on Washington for 
additional funding each and every year.
    VISN 3's history since 1996 could be summed up as follows: 
From 1996 to 2001, VERA cut the network's budget by some 10 
percent. At the same time, it saw an enormous increase in 
overall workload and priority 7 patients. So despite VA 
assurances to the contrary, getting new veterans into the 
system did nothing to guarantee additional funding in VISN 3. 
It has only further stretched the budget, led to long waits, up 
to a year in some cases, for new veterans to be able to receive 
medical services.
    There are a number of possible solutions to correcting 
VERA's problems. The first and easiest is to incorporate 
category 7 veterans into the funding formula. And I understand 
the VA is opposed to that kind of a proposal, Mr. Chairman, 
because it would necessitate a greater health care budget. 
That's a separate issue entirely, the problems which lie with 
the Office of Management and Budget and not with the VA.
    It's surprising that the VA is opposed to adopting 
meaningful changes to the VERA formula. I've long believed 
there seems to be some underlying hostility toward category 7 
veterans among the VA hierarchy in Washington. That hostility 
was epitomized by the VA health care language accompanying the 
President's budget earlier this year. That language suggested 
the creation of an annual deductible for category 7 veterans.
    It is gratifying that the General Accounting Office is now 
adopting the position that changes need to be made in the VERA 
formula. For years, GAO argued that too many facilities in the 
Northeast were underutilized and needed to be closed down, to 
be leased out, or sold off. I've long contended the reasons 
such facilities were underutilized was due to the historically 
high copayment costs that category 7 veterans have had to pay 
for using the system. Until the reduction in that copayment 
last year, it made no sense for the Medicare-eligible category 
7 veterans to be able to use the VA. Now that the copayment has 
been reduced from $50 to $15, more category 7 veterans are 
going to be able to use this system for their health care 
needs.
    So I look forward, Mr. Chairman, out of this hearing and 
all the testimony you've taken, that we can work with you and 
ensure that our veterans are going to be able in the future to 
receive the highest quality health care that they've earned 
through their service to our Nation.
    Let me comment that Jerry Donnellan, who is before us, our 
regional director of veterans services, worked out a clinic 
program for our veterans. It's been outstanding. And it's been 
so outstanding that he's overwhelmed now with veterans, they're 
finding difficulty in keeping up with it. This prevents the 
veterans from having to travel long distances. They are able to 
get immediate care and, as a result of the outstanding job that 
Mr. Donnellan did in Rockland County, New York, our adjoining 
counties have copied his clinical approach and are also finding 
a tremendous increase in the need for services.
    I have no questions at this time, Mr. Chairman. I can't 
thank you enough for your continued interest in making certain 
that our VA formulas meet the needs of our veterans.
    Mr. Shays. I thank the gentleman.
    Mr. Allen, I would be prepared to invite you to ask 
questions, or I can jump in. Which would you like?
    Mr. Allen. I would just as soon have you go ahead and I'll 
jump in.
    Mr. Shays. OK. I want to give credit to the GAO report and 
want to say that I realize we've kind of gotten sidetracked 
because I feel like--I'm trying to think of an analogy to 
describe it, but I see--I won't do it, but it's just like I 
feel almost overwhelmed by what I think the VA is telling us. I 
mean, whatever formula we have, we have an underfunded system 
that will not get the resources it needs. So we're kind of 
arguing about a formula. It's kind of like kind of an arranging 
the chairs on the deck of the Titanic. It's probably a poor 
example, but the best one I can come up with.
    But having said that, I would like to understand the VERA 
system better. And I would like to ask you, Ms. Bascetta, a few 
questions. I'd like to know why does VERA need to increase the 
number of case mix categories? I'd like to understand why it 
needs to do that.
    Ms. Bascetta. Right. In both the complex and basic care 
categories, one capitated rate is set. And because of the 
variability in the actual costs of different diagnoses within 
those broad categories, the networks receiving those payments 
are either under- or overcompensated. For example, for the 
$42,000 payment that they would receive for complex care, 
patients who are ventilator-dependent, require kidney 
transplants, other kinds of transplants, have serious spinal 
cord injuries, or various forms of mental illness, would be way 
over that 42,000.
    Similarly, in basic care you have a situation where there 
are many conditions that would be well in excess of the $3,100 
payment. Alternatively, there are lots of conditions that are 
much less than that. So if they have a finer gradation of 
payment categories within those three--if they expand to have 
more case mix categories rather than the three, they can more 
closely approximate the actual payments that would be needed to 
cover the costs of the networks.
    Mr. Shays. Now, the VA is looking at some other potential 
case mix approaches. I think there are three of them? Can you--
but before that, tell me why we need to deal with this in the 
year 2003 instead of waiting for more studies.
    Ms. Bascetta. Part of the reason is the equity that exists 
now. As our report shows, the networks that have been discussed 
most today, networks 1 and 3, would be gainers largely because 
of the change in case mix. Network 3 would receive about $10 
million more for the priority 7 payments and about $32 million 
more for case mix. Network 1 would receive a little less than a 
million for priority 7s, but close to $41 million for case mix.
    So these are--we can discuss, you know, the relative impact 
of that as opposed to more money for the whole system, but 
these are changes that can be made right now with a change in 
the policy for 2003.
    Mr. Shays. OK, would you take the three potential case mix 
approaches and tell me if any of them make sense? You want to 
basically put them all together, right?
    Ms. Bascetta. We think that the refinement of the current 
model is the best way to go for a few reasons. It's familiar to 
stakeholders. Part of what VA needs to do is ensure that the 
changes that they make can be easily explained to the 
stakeholders. And the stakeholders, under the current model, 
they may not agree with it, but they could understand how this 
addition of the 7s and a more refined case mix would benefit 
some networks while it would disadvantage some others.
    I shouldn't use the word ``disadvantage.'' It would more 
appropriately reflect the payments that they need.
    VA has talked--and one of their alternatives is what they 
call VERA 10, and it is this refined case mix.
    The other alternative that they're talking about and that 
is giving them some concern in the sense that they would like 
to wait to go to this other system of diagnostic cost groups, 
this is a system that is partially used now by the Medicare 
program. It probably is more sophisticated. Certainly 
conceptually it's a better way to go, because it doesn't rely 
on utilization. But it has not been, by any stretch of the 
imagination, fully implemented in Medicare.
    Only 10 percent of the payments are now made using this 
system. Only 30 percent will be made that way by 2004. It can't 
be used for long-term care payments because it would still rely 
on a utilization base for those payments. So you might as well 
stay with VERA which is utilization based now. It's also very 
reliant on much more precise data than we think VA is capable 
of developing right now for that use.
    So our concern is that if the Department decides to use a 
DCG-based approach or to tailor DCGs to the VA, we are not 
talking about anything that's feasible, probably not even in 
2004. So we think the cost of waiting and essentially 
tolerating the inequity that's in the current system is too 
high a price to pay.
    Mr. Shays. OK. Let me ask you about the supplementary 
funding. What are the factors that the VA needs to identify as 
relates to a supplemental funding request?
    Ms. Bascetta. Well, they know what the--they probably know 
what the major factors are. They know that network 
inefficiency, for example, is one struggle that many networks 
deal with. What they don't know is the relative contribution of 
the different factors that affect shortfalls to the need for 
the supplemental funding, and we think that they need to get a 
much better handle on this so that they can hopefully prevent 
the need for a supplemental funding in the future or, if not 
prevent it, at least be very explicit about why they're giving 
certain networks additional funds.
    The reason we think it's important is that not to have a 
handle on that could undermine the integrity of the process for 
all the other networks. In other words, if there's a perception 
that networks are not needing to justify their needs for 
supplemental funding, then there is really no disincentive for 
any other network raising their hand and saying they'd like 
additional funding as well.
    Mr. Shays. How can we feel confident they're not going to 
reward inefficiencies in the supplemental request?
    Ms. Bascetta. We can't feel confident about that unless we 
better understand what proportion of the need of the budget 
shortfall is due to inefficiency. Then, if we understand why, 
that inefficiency could be effectively dealt with.
    Mr. Shays. OK. So, bottom line, if they are inefficient, 
they still need the money.
    Ms. Bascetta. That's true.
    Mr. Shays. So they're going to get it, but it's not a very 
comforting thing to think, that's ultimately who gets it.
    You have the winners and losers--I thought it was on page 
10 of your report, the bar chart. It's on page 29, I'm sorry. 
No, it's page 12. Let me make sure I'm looking at the right 
one--change in VERA allocations from incorporating the case mix 
categories and priority 7 basic vested veterans treatment. 
Would you walk me through that again? You described it earlier. 
But I see Boston. When I see Boston, I don't need to be 
concerned it's going to Boston instead of Hartford instead of 
West Haven? That's the whole network.
    Ms. Bascetta. That's correct. And another allocation would 
be made from the network to the facilities.
    Mr. Shays. But walk me through. Are you saying that the 
district now--that Tom and I can link up in VISN 1 and link up 
against all our compatriots here, are we saying that VISN 1 is 
underfunded by $41 million?
    Ms. Bascetta. That's correct.
    Mr. Shays. Which is the most anywhere.
    Ms. Bascetta. Yes.
    Mr. Shays. And that is not--is that taking into 
consideration categories 7?
    Ms. Bascetta. No, that is just from case mix.
    Mr. Shays. OK. Of those who are actually in----
    Ms. Bascetta. I'm sorry. That is including priority 7s.
    Mr. Shays. So then we look at the Bronx, and that's another 
high one of $41.5 million. Then I look at Portland at $39 the 
other way and Long Beach, CA, $34. My sense is that you are--if 
we had the same dollar mix, you're basically saying to Long 
Beach you're going to have $34 million less.
    Ms. Bascetta. Correct.
    Mr. Shays. Well, we know that's not going to happen. No, we 
do. So then I guess the way we would have to deal with it is to 
say any new dollars. In other words, we would hold them 
harmless, probably. And I'd be curious, I don't think you'd 
have the statistics, but if we held them harmless so that your 
formula worked, I wonder how much more dollars would have to be 
spent in the other areas? Do you understand the question?
    Ms. Bascetta. Yes, I do.
    Mr. Shays. In other words, one way we can hold them 
harmless is to say you don't lose, but, Connecticut, you'd get 
41.
    But if we were really going to hold them harmless under a 
true formula where the formula would still be accurate and, 
Lord knows, they'd still need the money, we would--I'd be 
curious to know how much more--would that $41 million become 
$120 million or something like that? Is that possible to figure 
out under your formula? Not now, for your testimony now----
    Ms. Bascetta. I suppose it would be possible. But I don't 
have those.
    Mr. Shays. See, I mean, because we're going--I'm going 
under the assumption that I don't think can be really refuted, 
is that all VISNs need more money. You're just saying, within 
that formula of underfunded appropriations, the formula could 
be better directed.
    Ms. Bascetta. Correct.
    Mr. Shays. We're all agreeing that even Portland can use 
that $39 million.
    Ms. Bascetta. I'm sure they've spent it.
    Mr. Shays. Right. Yeah.
    Mr. Allen. Could I--if you would yield, I'll wade into it.
    I don't know what the numbers are either. But my guess is--
and let me test this out. I would make two points.
    First of all, when the VERA system was implemented over a 
period of time, VISN 1 took the hit. I mean, year to year to 
year we took a hit at least in purchasing power, if not in 
absolute dollar, an absolute dollar claim.
    Mr. Shays. Would the gentleman yield?
    But that first year we probably got what was fair under the 
formula in that very first year. Or no.
    Mr. Allen. I know we've had an actual decline in dollars. 
I'm pretty sure about that. Let me----
    Mr. Musselwhite. That's correct.
    Mr. Allen. So the question is whether----
    Mr. Shays. Is everybody's mic on? You're kind of far away, 
Mr. Musselwhite. Sorry for the squeaks here.
    Mr. Allen. The two points I have is--one is, so far as I 
know, VISN 1 and VISN 3 have had actual declines in dollars 
over the cost of this 5-year period. That's No. 1.
    But, No. 2, I suspect--and I'm testing this, and I'm no 
math major--but if you actually were trying to implement this 
formula in a way that would do no harm to any of the VISNs like 
Portland and San Francisco and Long Beach, the cost would be 
huge, or it would be a lot more than simply adding up the 
positive numbers on the right-hand side.
    Mr. Shays. It would be.
    Mr. Donnellan, you're in VISN 2, is that correct?
    Mr. Donnellan. Three.
    Mr. Shays. You're in VISN 3. So it comes up. So you--OK. 
That's good. So we all can agree here. We don't have any 
arguments. I thought maybe you were in VISN 2.
    Mr. Donnellan. No, 3.
    Mr. Shays. What is your reaction, both of you, when you 
hear about the underfunded nature of the VA? What is your--
you're both veterans, correct?
    Mr. Burke. Yes.
    Mr. Bachman. Um-hmm.
    Mr. Shays. The question I'm asking is--I mean, does your 
mind say, you know what? We're in a difficult situation. Let's 
find a good compromise here. Or do you basically say, gosh darn 
it, we're veterans. We're entitled to this service. No veteran 
left behind. Kind of like No Child Left Behind.
    Mr. Donnellan. Well, yes, sir, I think no veteran should be 
left behind, but I personally am confused. Because several 
years ago when you were in our district and we had those 
hearings about VERA we were told go out and beat the bushes, 
enroll veterans in the system. Because one of the concerns was 
that the Northeast, particularly VISN 3, the population was 
falling off. If the population fell off, the hospitals would be 
closed. So the more bodies we've got, the more head count--it 
goes back to Vietnam. It goes back to Vietnam. We've got to get 
the body count up.
    So we beat the drums. It went from 250 to 6,000 people in 
about 4 years. If you give me another clinic, I could fill it 
by next year.
    So I'm getting mixed signals from the people who are giving 
me signals.
    The other point that I brought up in my testimony is the VA 
hospital near us at Montrose, New York, which I'm sure is 
similar to many others across the country, where it was opened 
in 1950 I believe is a 2,000 bed hospital now has less than 300 
beds but still sits on 190 acres. Our local hospital in Nyack, 
New York, serves more inpatients than that on a city block.
    So if we could do something with that surplus land that's 
sitting there, for all practical purposes, costing money, 
perhaps that might be a way to go. I realize it's not a 
complete solution but that many people could be serviced in a, 
you know, 6-story, small-footprint hospital building.
    Mr. Shays. Mr. Bachman.
    Mr. Bachman. I guess as a category 1 veteran in my time I 
look at it--again, we probably shouldn't leave anybody behind, 
but I think we have to look at it realistically. I think, as we 
look at this, you have to say to yourself, what did VERA do and 
can VERA, the way it is set up now, maintain the system? And 
what does Congress have to do, what does the Veterans 
Administration have to do to make it correct at this stage of 
the game without tearing the system apart?
    I agree with the fact that our stakeholders do know the 
system. I look at it, I guess, as pretty basic math if you want 
to--sometimes simplistic is more than complex. I think if you 
look at what the GAO did, I think Congress's responsibility is 
to give up enough money and whatever it costs to even the 
playing field for everybody across the board.
    I'm not saying that Long Beach needs extra money, but those 
that are already in the red, bring them to the playing field. 
Then look at the formula and say, is--because if you take the 
GAO's 50 percent at $849 of the basic rate for a category 7, 
you're still a loser. I think that if you look more to the 
GAO's national average of $4,729 of what it costs per veteran 
you're coming pretty darn close to what it's going to cost to 
even continue this.
    And I think it--it comes down to this: If you do it that 
way and not work it on workload, if you base it upon the 
veterans that you take in, as we were all mandated back in 
1998, open the doors up and bring all these people in, it gives 
Congress each year the ability to know how much the Veterans 
Administration increased their number.
    It also, when you look at complex--I think what the 
Congressman needs to understand, I don't think he was told this 
at all, is complex, when you look at it, there's tons of 
categories in there, but there's only two that are permanent. 
That's spinal cord injury, HIV and AIDS. Everything else is 
based on an influx.
    PTSD, you're in 5 years. If you don't get reevaluated, 
you're out. So now you're a basic. If you're a stroke patient, 
you're in 3 years. If you don't get reevaluated, you're out. So 
you go back to basic. Then it takes--there's a 20-year lag time 
to get you there. So you're always behind the power curve. No 
matter what you're doing, you're not winning. If you're 
complex, you're complex. If you're basic, you're basic.
    Raise the rates of what it takes. Report to Congress how 
much more veterans you took in. Have Congress bring up the 
money.
    A lot of times what happens with the money that Congress 
appropriates is that it gets spent on other things. It doesn't 
get spent on medical costs. Small portion to medical. You raise 
the budget by $5 billion, how much of it is truly toward 
medical? A third, a quarter or one-tenth. That's the problem.
    Mr. Shays. Thank you.
    Ms. Bascetta, when--Dr. Roswell acknowledged there are a 
lot of factors that are contributing to this problem, but one 
of the things he did acknowledge was that within a VISN you 
have part of it that is making efficiencies and another part 
that isn't, but it becomes so within the VISN there's a 
disincentive for one part of it to become more efficient if the 
other part hasn't.
    When I look at your chart, we would need about $175 
million, which in the realm of things isn't a lot of money 
compared to the overall budget, to at least hold--if we held 
harmless those who have more than they should. But did you look 
at efficiencies within a VISN to understand who might be 
winners and losers within a VISN?
    Ms. Bascetta. No, we didn't.
    Mr. Shays. You know what I mean by losers? I mean the 
losers are those who actually made cost savings, closed down a 
facility. I'm thinking, frankly, of our own VISN. We all know 
that Boston didn't eagerly jump in to making savings. So--and 
that's what I reacted to when I saw your chart saying ``to 
Boston.'' But bottom line is you didn't look at that issue.
    Ms. Bascetta. No, we didn't.
    Mr. Shays. I'm going to ask to you do something else. I'm 
almost tempted to say, like Connie Chung, just between you and 
me, one--frankly, there doesn't appear to be any reporter here, 
not that has prevented it from getting in the press. But if you 
were being very candid with us, having looked at this system, 
and you were to say to the administration, this is what you 
need to look at, administration, and these are some of the 
mistakes you all have made, and then you said to Congress, 
candidly, this is what you all did and this is what you need to 
look at, what would the answer be to that question? What are 
the mistakes Congress might have made?
    We know we made mistakes. What are those and what are the 
mistakes you think the administrative side has made?
    Ms. Bascetta. Well, I don't know that I'd call it a 
mistake. I think it's pretty common to pass major legislation 
and not think enough about the unintended consequences.
    When eligibility reform was passed, I know that there was 
attention focused on the situation that could occur, which is 
that more veterans could come in than the VA could pay for. So 
I think Dr. Roswell mentioned that the Secretary has the option 
every year to decide whether or not he needs to cutoff 
enrollment at their priority level, depending on what the 
appropriation is.
    I think it's probably impossible to do that once priority 7 
veterans, for example, are in the system. I think it's probably 
impossible to close the system to them. Moreover, without them, 
the liability of this system over the long run is questionable. 
Because these are the future veterans. The older veterans, the 
demographics are such that the older veterans are dying at a 
very fast rate.
    Mr. Shays. Yeah, but when a veteran leaves or dies they're 
replaced by someone else.
    Ms. Bascetta. Um-hmm.
    Mr. Shays. So I don't think that's the issue.
    But your point about Congress is, though, we basically 
increased the eligibility, and when you say the unintended 
consequence we basically did it without providing any new 
funding. So that would be a clear question mark. And then our 
escape clause was, we said if we didn't provide you the 
funding, you, Mr. Administrator, have the ability to deal with 
it by then restricting who qualifies.
    Ms. Bascetta. Correct.
    Mr. Shays. And the administrator, the Secretary, can do it 
without an approval from Congress. They can just do it. But a 
tough thing politically to do.
    Ms. Bascetta. Correct. That's right.
    You know, you yourself mentioned the issue. With the CBOCs 
bringing in people, we did create a demand.
    Mr. Shays. These are the Community----
    Ms. Bascetta. Community Based Outpatient Clinics. Sorry.
    We did some work last year for Senator Bond. What we found 
was that, in fact, the CBOCs certainly make it more convenient 
for veterans to come in, but fully two-thirds of the veterans 
who used a CBOC also used a parent facility. So, although we 
don't do a quantitative analysis to nail this down, our belief 
is that those veterans would have come anyway because of 
eligibility reform, not because of the CBOC.
    Mr. Shays. You know what? I just would intuitively tell you 
I don't think so in our district. I think if you can go in the 
greater Stamford area and you can get this service, you're not 
driving to West Hartford--West Haven. Excuse me West Haven. So, 
I mean, you have had the study. I'd love to see where that 
study was.
    Ms. Bascetta. I can share it with you. I'm from 
Connecticut, so I know what the driving distances are there; 
and they're certainly shorter than they are in other parts of 
the country.
    Mr. Shays. When last have you been there? The distances 
aren't any longer, but the queuing time is. The queuing time. 
Big time.
    Ms. Bascetta. You're absolutely right. In fact, in VA's 
formula for geographic access, Dr. Roswell said that I think 87 
percent are within 30, whatever. They've gone to a distance--to 
a time measure rather than a distance measure, because that's 
the reality.
    Mr. Shays. That's a small point.
    Ms. Bascetta. But the point that I was making was that we 
have heard that it depends on what you're going for. You might 
be willing to make that drive or sit in that traffic if you're 
going for the prescription drug. As you point out, if you're 
paying hundreds or thousands as opposed to $7 for a 30-day 
supply you might make that drive.
    Mr. Shays. Thank you.
    Mr. Allen. A quick comment. In Maine, people get on buses 
to go to Canada to get their prescription drugs. So it depends 
on how much you're buying.
    But my serious comment is--I have to leave, Mr. Chairman, 
but I thought I would ask Mr. Bachman to address your earlier 
question, that comment particularly on the kinds of proposals 
that are sometimes called the fee card proposal, just to be 
provocative.
    Mr. Bachman. Since there's no news media here, I'll share 
with you.
    As we talked about this in my committee, we said, what 
happens if you just--if Congress stood up, whether it's 
politically correct or suicidal or not, and just disbanded the 
Veterans Administration, just said, it's over, it's done with, 
we cannot afford it, we cannot provide you with care. Here is a 
fee card and go find your services in the community.
    Just in the few things that I've seen, that the cost of 
what it costs from the VA to pay for it, you would have to 
probably fund 10 times more than the budget that you have right 
now to do that. Because the facilities are already there. I 
mean, if you can provide, as I quoted you earlier, $250 for a 
single test that costs almost $3,000 in the community and you 
are footing that entire bill, you know, would you--so, really, 
you can't do that.
    You have a system that's there. I think you just need to 
look at the system. The mistake you made, Congress made was you 
created--you opened the doors up, but you didn't fund it. I 
think you didn't have the information to fund it.
    As I look and as I read through the GAO, I do not think you 
were provided with the information, nor do I think that the VA 
itself knew what was going to happen when they opened that door 
up.
    Mr. Shays. I think they probably knew more than you 
realized.
    We're really closing up, so we'll have one recorder just 
finish up here.
    So, bottom line, you're done. Would any of you like to make 
a closing comment?
    Ms. Bascetta. Just quickly. We don't know, but I'm not 
confident that the VA knows what budget they really need. We 
would really like to see them make a more concerted effort to 
develop a needs budget and to use the CARES process to develop 
that kind of information.
    Mr. Shays. Thank you all very much.
    I don't know if you're running out of paper or whether 
there's a system that I just destroyed that will never be 
straightened out.
    Thank you all very much here. This hearing is closed.
    [Whereupon, at 5:10 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
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