Veterans Medical Care: FY2009 Appropriations

Veterans Medical Care:
FY2009 Appropriations
Updated October 24, 2008
Sidath Viranga Panangala
Analyst in Veterans Policy
Domestic Social Policy Division



Veterans Medical Care: FY2009 Appropriations
Summary
The Department of Veterans Affairs (VA) provides benefits to veterans who
meet certain eligibility rules. Benefits to veterans range from disability compensation
and pensions to hospital and medical care. The VA provides these benefits through
three major operating units: the Veterans Health Administration (VHA), the Veterans
Benefits Administration (VBA), and the National Cemetery Administration (NCA).
The VHA is primarily a direct service provider of primary care, specialized care, and
related medical and social support services to veterans through the nation’s largest
integrated health care system.
On February 4, 2008, the President submitted his FY2009 budget proposal to
Congress. The Administration requested a total of $39.2 billion (excluding
collections) for VHA. This is a 5.3% increase (or $2.0 billion) over the FY2008
enacted level. Including total available resources (including medical collections) the
Administration’s budget would have provided $41.1 billion for VHA.
On March 7, 2008, the House (H.Con.Res. 312) and Senate (S.Con.Res. 70)
reported their respective budget resolutions. After negotiations between the House
and Senate, the House agreed to an amended version of S.Con.Res. 70 (Conference
Report; H.Rept. 110-659). The conference agreement provided $48.2 billion for
FY2009 for discretionary veterans’ programs, including medical care, and provided
$45.1 billion in mandatory funding for veterans programs.
On June 24, the House Appropriations Committee marked up the Military
Construction and Veterans Affairs Appropriations bill (H.R. 6599; H.Rept. 110-775)
for FY2009. On August 1, the House passed H.R. 6599. The House-passed measure
provided $40.8 billion (excluding collections) for VHA. On July 17, 2008, the
Senate Appropriations Committee marked up its version of the FY2009 Military
Construction and Veterans Affairs and Related Agencies Appropriations bill (S.
3301; S.Rept. 110-428). The Senate Appropriations Committee recommended $41.1
billion (excluding collections) for VHA for FY2009.
On September 30, the President signed the H.R. 2638, the Consolidated
Security, Disaster Assistance, and Continuing Appropriations Act, 2009, into law
as P.L. 110-329. This act included the Military Construction and Veterans Affairs
Appropriations Act, 2009. In total H.R. 2638 provides a total of $40.9 billion
(excluding collections) for VHA.
P.L. 110-329 does not include bill language authorizing fee increases as
requested by the Administration’s budget proposal for the VHA for FY2009. P.L.
110-329 has provided additional funding to increase Priority Group 8 enrollment in
FY2009, and to increase the mileage reimbursement rate to 41.5 cents per mile.
With the passage of H.R. 2638 (P.L. 110-329), the appropriation process for
funding VHA for FY2009 was completed by Congress. This report will not be
updated.



Contents
Most Recent Developments..........................................1
Background ......................................................2
The Veterans Health Care System.....................................3
The Veteran Patient Population...................................5
Eligibility for Veterans’ Health Care...................................7
“Promise of Free Health Care”...................................7
VHA Health Care Enrollment....................................8
Veteran’s Status...........................................8
Operation Enduring Freedom (OEF) and Operation Iraqi Freedom
(OIF) Veterans......................................10
Priority Groups and Scheduling Appointments..................11
Formulation of VHA’s Budget ......................................11
Funding for the VHA..............................................14
Medical Services.............................................14
Medical Support and Compliance (Previously Medical Administration)..14
Medical Facilities.............................................15
Medical and Prosthetic Research.................................15
Medical Care Collections Fund (MCCF)...........................15
FY2008 Budget Summary..........................................18
House Action................................................18
Senate Action................................................18
Consolidated Appropriations Act for FY2008.......................19
Supplemental Appropriation Act, 2008 (P.L. 110-252) ...............19
FY2009 VHA Budget.............................................20
FY2009 Congressional Budget Resolution.........................20
House Action ...............................................21
Construction Projects......................................21
Senate Committee Action ......................................22
Construction Projects......................................22
Final MILCON-VA Appropriations Act of 2009....................22
Construction Projects......................................23
Major Areas of Committee Interest...............................23
Mental Health Care and Traumatic Brain Injuries................23
Priority Group 8 Veterans..................................25
Beneficiary Travel Mileage Reimbursement....................26
Key Budget Issues................................................33
Assess an Annual Enrollment Fee................................33
Increase Pharmacy Copayments..................................33
Impact of Fee Proposals....................................34



Appendix A. Priority Groups and Their Eligibility Criteria................38
Appendix B. Copayments for Health Care Services: 2008.................40
Appendix C. Financial Income Thresholds
for VA Health Care Benefits, Calender Year 2008...................42
Appendix D. VHA Appropriations for FY2005 and FY2006...............43
Appendix E. VHA Appropriations for FY2007 and FY2008...............45
List of Figures
Figure 1. Conceptual Overview of VA Enrollee Health Care
Demand Model...............................................13
Figure 2. Present Copayment Process.................................36
List of Tables
Table 1. VA Appropriations, FY2008-FY2009...........................2
Table 2. Number of Veterans Enrolled in the VA Health Care System.........6
Table 3. Number of Patients Receiving Care from VA.....................6
Table 4. Medical Care Collections, FY2003-FY2007....................17
Table 5. Mental Health Spending, FY2007-FY2009......................24
Table 6.Traumatic Brain Injury (TBI) Spending, FY2007-FY2009..........25
Table 7. VHA Appropriations by Account, FY2007-FY2009...............29
Table 8. Appropriations for VA Construction Projects,
FY2008-FY2009 .............................................31



Veterans Medical Care:
FY2009 Appropriations
Most Recent Developments
On September 30, 2008, the President signed H.R. 2638, the Consolidated
Security, Disaster Assistance, and Continuing Appropriations Act, 2009, into law
as P.L. 110-329. This act included the Military Construction and Veterans Affairs
Appropriations Act, 2009 (MILCON-VA Appropriations Act of 2009), as its1
Division E. The House passed H.R. 2638 on September 24 and the Senate passed
it on September 27. The MILCON-VA Appropriations Act of 2009 provides a total
of $40.9 billion for the Veterans Health Administration (VHA) for FY2009 (See
Table 1), a $1.7 billion increase over the Administrations request and a $3.7 billion
over the FY2008 enacted amount. P.L.110-329 did not include any bill language
authorizing fee increases as requested by the Administration’s budget proposal for
the VHA for FY2009.
This report provides a brief background on the veterans health care system,
followed by a discussion of the FY2009 VHA budget request, House and Senate
Appropriations Committee action, and the final enacted appropriations for VHA.
The report concludes with a discussion of major VHA budget proposals included in
the President’s budget request for FY2009.


1 Division A provides continuing appropriations for FY2009 for activities that were funded
in the prior fiscal year by nine different regular appropriations acts. Division B provides
supplemental appropriations for FY2008 to various departments and agencies for disaster
relief and recovery activities. The remaining divisions each set forth funding for regular
appropriations for FY2009: Division C, the Department of Defense Appropriations Act; and
Division D, the Homeland Security Appropriations Act. For details on the Consolidated
Appropriations Act for FY2009, see CRS Report RL34711, Consolidated Appropriations
Act for FY2009 (P.L. 110-329): An Overview, by Robert Keith.

Table 1. VA Appropriations, FY2008-FY2009
($ thousands)
FY2009
Senate FY2009
FY2009Committee Enacted
FY2008FY2008FY2008FY2008FY2009House(S.Rept. 110-(P.L.
request House Senateenactedrequest(H.R. 6599) 428)110-329)
l Department of
rans Affairs
) $83,903,751 $87,696,839 $87,501,280 $88,111,519 $90,761,057 $93,685,057 $94,792,750 $94,351,057
otal
ndatory $44,487,250 $44,487,250 $44,487,250 $44,487,250 $45,996,925 $45,996,925 $46,742,925 $46,742,925
t a l
iscretionary $39,416,501 $43,209,589 $43,014,030 $43,624,269 $44,764,132 $47,688,132 $48,049,825 $47,608,132
Total Veterans
Health
Ad ministration
(V HA) $34,612,671 $37,122,000 $37,213,220 $37,201,220 $39,178,503 $40,783,270 $41,078,232 $40,958,903
: S.Rept. 109-286; H.Rept. 109-464; H.Rept. 110-186; S.Rept. 110-85; Congressional Record, vol. 153 (December 17, 2007),
16249-H16431; H.Rept. 110-775; S.Rept. 110-428; and Congressional Record, vol.154, (September 24, 2008), pp.H9868-H9869.
FY2008 enacted includes funding provided in the Supplemental Appropriation Act, 2008 (P.L. 110-252).
Background
The Department of Veterans Affairs (VA) provides a range of benefits and
services to veterans who meet certain eligibility rules, including disability
compensation and pensions, education, training and rehabilitation services, hospital2
and medical care, assistance to homeless veterans, home loan guarantees, and death
benefits that cover burial expenses.3 The VA carries out its programs nationwide
through three administrations and the Board of Veterans Appeals (BVA). The
Veterans Health Administration (VHA) is responsible for health care services and4
medical research programs. The Veterans Benefits Administration (VBA) is
responsible for, among other things, providing compensations, pensions, and


2 For detailed information on homeless veterans programs, see CRS Report RL34024,
Veterans and Homelessness, by Libby Perl.
3 For a detailed description on eligibility for veterans disability benefits programs, see CRS
Report RL33113, Veterans Affairs: Basic Eligibility for Disability Benefit Programs, by
Douglas Reid Weimer.
4 For a detailed description of veterans’ health care issues, see CRS Report RL33993,
Veterans’ Health Care Issues, by Sidath Viranga Panangala.

education assistance.5 The National Cemetery Administration (NCA)6 is responsible
for maintaining national veterans cemeteries; providing grants to states for
establishing, expanding, or improving state veterans cemeteries; and providing
headstones and markers for the graves of eligible persons, among other things.
The VA’s budget includes both mandatory and discretionary spending accounts.
Mandatory funding supports disability compensation, pension benefits, vocational
rehabilitation, and life insurance, among other benefits and services. Discretionary
funding supports a broad array of benefits and services including medical care. In
FY2008 discretionary budget authority accounted for about 49% of the total VA
budget authority of approximately $88 billion with about 86% of this discretionary
funding going toward supporting VA health care programs.
The Veterans Health Care System
The VHA operates the nation’s largest integrated direct health care delivery7
system. The VA’s health care system is organized into 21 geographically defined
Veterans Integrated Service Networks (VISNs). Although policies and guidelines are
developed at VA headquarters to be applied throughout the VA health care system,
management authority for basic decision making and budgetary responsibilities are8
delegated to the VISNs.
Recently, VA’s Inspector General (IG) for Health Care Inspections has stated
that the current VISN management structure is ineffective. According to the IG’s
statement “VHA has an organizational bias in favor of local decision makers over
national leaders which impedes the provision of one standard of excellent medical
care for all eligible veterans. The lack of a standard organizational structure leads to
differences in financial systems, medical data systems, and management and9
committee structures from VISN to VISN.”
Congressionally appropriated medical care funds are allocated to the VISNs
based on the Veterans Equitable Resource Allocation (VERA) system, which


5 For a detailed description of veterans’ benefits issues, see CRS Report RL33985, Veterans’
Benefits: Issues in the 110th Congress, by Carol D. Davis (Coordinator).
6 Established by the National Cemeteries Act of 1973 (P.L. 93-43).
7 Established on January 3, 1946, as the Department of Medicine and Surgery by P.L. 79-

293, succeeded in 1989 by the Veterans Health Services and Research Administration,


renamed the Veterans Health Administration in 1991.
8 Kizer Kenneth, John Demakis, and John Feussner, “Reinventing VA health care:
Systematizing Quality Improvement and Quality Innovation.” Medical Care. vol.38,no.6
(June 200), Suppl 1:I7-16.
9 U.S. Congress, House Committee on Appropriations, Subcommittee on Military
Construction, Veterans Affairs, and Related Agencies Appropriations, Military
Construction, Veterans Affairs, and Related Agencies Appropriations for FY2009, hearings,thnd

110 Congress, 2 sess., February 2008, p. 295.



generally bases funding on patient workload.10 Prior to the implementation of the
VERA system, resources were allocated to facilities primarily on the basis of their
historical expenditures. Unlike other federally funded health insurance programs,
such as Medicare and Medicaid, which finance medical care provided through the
private sector, the VHA provides care directly to veterans.
In FY2008, VHA operated 153 medical centers, 135 nursing homes, 795
ambulatory care and community-based outpatient clinics (CBOCs),11 6 independent
outpatient clinics, and 232 Readjustment Counseling Centers (Vet Centers). 12 The
VHA also pays for care provided to veterans by private-sector providers on a fee
basis under certain circumstances. Inpatient and outpatient care are also provided in
the private sector to eligible dependents of veterans under the Civilian Health and
Medical Program of the Department of Veterans Affairs (CHAMPVA).13 The VHA
also provides grants for construction of state-owned nursing homes and domiciliary
facilities and collaborates with the Department of Defense (DOD) in sharing health
care resources and services.


10 About 90% of the VHA appropriation is allocated through VERA. Networks also receive
appropriated funds not allocated through VERA for such things as prosthetics, homeless
programs, readjustment counseling, and clinical training programs. VA facilities can also
retain collections from insurance reimbursements and copayments and use these funds for
the care of veterans.
11 Data on the number of CBOCs differ from source to source. Some sources count
outpatient clinics located at VA hospitals while others count only freestanding CBOCs. The
number represented in this report excludes clinics located in VA hospitals. On June 26,

2008, VA announced that it would be establishing 44 new CBOCs in FY2008 and FY2009.


The new CBOCs are to be located in: Marshall County, and Wiregrass, AL;
Matanuska-Susitna Borough area, AK; Ozark, and White County, AR; East Bay-Alameda
County area, CA; Summerfield, FL; Baldwin County, Coweta County, Glynn County, and
Liberty County, GA; Miami County, and Morgan County, IN; Wapello County, IA; Lake
Charles, Leesville, Natchitoches, St. Mary Parish, and Washington Parish, LA;
Lewiston-Auburn area, ME; Douglas County, and Northwest Metro, MN; Franklin County,
MO; Rio Rancho, NM; Robeson County, and Rutherford County, NC; Grand Forks County,
ND; Gallia County, OH; Altus, Craig County, Enid, and Jay, OK; Giles County, Maury
County, and McMinn County, TN; Katy, Lake Jackson, Richmond, Tomball, and El Paso
County, TX; Augusta County, Emporia, and Wytheville, VA; and Greenbrier County, WV.
12 On July 9, 2008, VA announced that it would be establishing 39 new Vet Centers. The
new Vet Centers are to be located in the following counties: Madison, AL; Maricopa, AZ;
Kern, Los Angeles, Orange, Riverside, Sacramento, San Bernardino, and San Diego, CA;
Fairfield, CT; Broward, Palm Beach, Pasco, Pinellas, Polk, and Volusia, FL; Cobb, GA;
Cook, and DuPage, IL; Anne Arundel, Baltimore, and Prince George’s, MD; Macomb and,
Oakland, MI; Hennepin, MN; Greene, MO; Onslow, NC; Ocean, NJ; Clark, NV; Comanche,
OK; Bucks, and Montgomery, PA; Bexar, Dallas, Harris, and Tarrant, TX; Virginia Beach,
VA; King, WA; and Brown, WI. VA plans to have the 39 sites fully operational by the end
of December 2009.
13 For further information on CHAMPVA, see CRS Report RS22483, Health Care for
Dependents and Survivors of Veterans, by Sidath Viranga Panangala and Susan Janeczko.

The Veteran Patient Population
During FY2008, the VHA had an estimated total enrolled veteran population of
7.9 million and provided medical care to about 5.2 million unique veteran patients
(see Tables 2 and 3).14 According to VHA estimates, the number of unique veteran
patients is estimated to increase by approximately 69,000, from 5.189 million in
FY2008 to 5.258 million in FY2009. As shown in Table 3, there would be a 1.6%
increase in the total number of unique patients (both veterans and non-veterans),
from 5.681 million in FY2008 to approximately 5.771 million in FY2009. This
number includes veterans from Operation Iraqi Freedom (OIF) and Operation
Enduring Freedom (OEF). In FY2009, VHA estimates that it will treat 333,275 OIF
and OEF veterans, an increase of 39,930 patients, or 13.6%, over the FY2008 level.
In FY2009, VA would be treating over 513,000 non-veterans, an increase of over15

21,000, or 4.3%, over the FY2008 level.


The total number of outpatient visits, including visits to Vet Centers, reached

63 million during FY2007 and is projected to increase to approximately 65 million16


in FY2008 and 70.4 million in FY2009. In FY2008, the VHA estimates that it will
spend approximately 63.7% of its medical services obligations on outpatient care.17


14 “Enrolles” are veterans who have enrolled in the VA health care system. “Unique
patients” are those receiving medical care who are counted only once. In any given year,
some enrollees do not seek any medical care, either because they do not become sick or
because they rely on other health care systems, such as private health insurance, for care.
15 Non-veterans include CHAMPVA patients, reimbursable patients with VA affiliated
hospitals and clinics, care provided on a humanitarian basis, and employees receiving
preventive occupational immunizations.
16 This number excludes outpatient care provided on a contract basis and outpatient visits
to readjustment counseling centers. U.S. Department of Veterans Affairs, FY2009 Budget
Submission, Medical Programs and Information Technology Programs, Vol. 2 of 4.
17 Ibid., p.1C-20.

Table 2. Number of Veterans Enrolled in the VA Health
Care System
FY2006 FY2007 FY2008 FY2009
Priority GroupsActualActualEstimate Estimate
1 912,787 977,389 957,792 977,773
2 522,829 545,196 566,829 584,605
3 996,063 1,023,256 1,047,724 1,063,512
4 241,716 244,159 250,920 260,106
5 2 ,538,228 2,413,796 2,461,855 2,468,941
6 265,253 312,256 274,482 278,437
Subtotal Priority Groups 1-65,476,8765,516,0525,559,3025,633,374
7 218,248 202,049 615,581 625,570
8 2 ,177,314 2,115,344 1,738,801 1,728,535
Subtotal Priority Groups 7-82,395,5622,317,3932,354,3822,354,105
Total Enrollees7,872,4387,833,4457,913,6847,987,479
Source: U.S. Department of Veterans Affairs, FY2009 Budget Submission, Medical Programs and
Information Technology Programs, Vol. 2 of 4.
Note: See Appendix A for the Priority Groups and their eligibility criteria.
Table 3. Number of Patients Receiving Care from VA
FY2006 FY2007 FY2008 FY2009
Priority GroupsActualactualEstimate Estimate
1 768,537 820,410 815,432 832,622
2 342,023 358,270 374,182 386,660
3 568,740 590,860 605,066 616,123
4 177,563 181,572 200,001 207,994
5 1 ,645,781 1,544,328 1,657,210 1,672,504
6 134,425 155,939 143,483 145,666
Subtotal Priority Groups 1-63,637,0693,651,3793,795,3743,861,569
7 197,901 173,149 373,285 380,934
8 1 ,195,612 1,191,161 1,020,644 1,015,616
Subtotal Priority Groups 7-81,393,5131,364,3101,393,9291,396,550
Subtotal Unique Veteran Patientsa 5,030,5825,015,6895,189,3035,258,119
Non-Veteransb 435,488463,240492,117513,232
Total Unique Patients 5,466,0705,478,9295,681,4205,771,351
Source: U.S. Department of Veterans Affairs, FY2009 Budget Submission, Medical Programs and
Information Technology Programs, Vol. 2 of 4.
a. Unique veteran patients include Operation Iraqi Freedom (OIF) and Operation Enduring Freedom
(OEF) veterans. These patients numbered: 155,272 in FY2006 and 205,628 in FY2007 and are
estimated to be 293,345 in FY2008 and 333,275 in FY2009.
b. Non-veterans include CHAMPVA patients, reimbursable patients with VA- affiliated hospitals and
clinics, care provided on a humanitarian basis, and employees receiving preventive occupational
i mmuni z a t i o ns.



Eligibility for Veterans’ Health Care
“Promise of Free Health Care”
To understand some of the issues discussed in this report, it is important to
understand eligibility for VA health care, the VA’s enrollment process, and its
enrollment priority groups. Unlike Medicare or Medicaid, VA health care is not an
entitlement program. Contrary to numerous claims made concerning “promises” to
military personnel and veterans with regard to “free health care for life,” not every
veteran is automatically entitled to medical care from the VA.18 Prior to eligibility
reform in 1996, provisions of law governing eligibility for VA care were complex
and not uniform across all levels of care. All veterans were technically “eligible” for
hospital care and nursing home care, but eligibility did not by itself ensure access to
care.
The Veterans’ Health Care Eligibility Reform Act of 1996, P.L. 104-262,
established two eligibility categories and required the VHA to manage the provision
of hospital care and medical services through an enrollment system based on a
system of priorities.19 P.L. 104-262 authorized the VA to provide all needed hospital
care and medical services to veterans with service-connected disabilities, former
prisoners of war, veterans exposed to toxic substances and environmental hazards
such as Agent Orange, veterans whose attributable income and net worth are not
greater than an established “means test,” and veterans of World War I. These
veterans are generally known as “higher priority” or “core” veterans (see Appendix
A, discussed in more detail below).20 The other category of veterans are those with
no service-connected disabilities and with attributable incomes above an established
means test (see Appendix C).
P.L. 104-262 also authorized the VA to establish a patient enrollment system to
manage access to VA health care. As stated in the report language accompanying
P.L. 104-262, “the Act would direct the Secretary, in providing for the care of ‘core’
veterans, to establish and operate a system of annual patient enrollment and require
that veterans be enrolled in a manner giving relative degrees of preference in
accordance with specified priorities. At the same time, it would vest discretion in the
Secretary to determine the manner in which such enrollment system would21
operate.”
Furthermore, P.L. 104-262 was clear in its intent that the provision of health
care to veterans was dependent upon the available resources. The committee report
accompanying P.L. 104-262 states that the provision of hospital care and medical


18 For a detailed discussion of “promised benefits,” see CRS Report 98-1006, Military
Health Care: The Issue of “Promised” Benefits, by David F. Burrelli.
19 U.S. Congress, House Committee on Veterans Affairs, Veterans’ Health Care Eligibility
Reform Act of 1996, report to accompany H.R. 3118, 104th Cong. 2nd sess., H.Rept. 104-690
p. 2.
20 Ibid., p.5.
21 Ibid., p.6.

services would be provided to “the extent and in the amount provided in advance in
appropriations acts for these purposes. Such language is intended to clarify that these
services would continue to depend upon discretionary appropriations.”22
VHA Health Care Enrollment
As stated previously, P.L. 104-262 required the establishment of a national
enrollment system to manage the delivery of inpatient and outpatient medical care.
The new eligibility standard was created by Congress to “ensure that medical
judgment rather than legal criteria will determine when care will be provided and the
level at which care will be furnished.”23
For most veterans, entry into the veterans’ health care system begins by
completing the application for enrollment. Some veterans are exempt from the
enrollment requirement if they meet special eligibility requirements.24 A veteran may
apply for enrollment by completing the Application for Health Benefits (VA Form
10-10EZ) at any time during the year and submitting the form online or in person at
any VA medical center or clinic, or mailing or faxing the completed form to the
medical center or clinic of the veteran’s choosing.25 Once a veteran is enrolled in the
VA health care system, the veteran remains in the system and does not have to
reapply for enrollment annually. However, those veterans who have been enrolled
in Priority Group 5 (see Appendix A, discussed in more detail below) based on
income must submit a new VA Form 10-10EZ annually with updated financial26
information demonstrating inability to defray the expenses of necessary care.
Veteran’s Status. Eligibility for VA health care is based primarily on
“veteran’s status” resulting from military service. Veteran’s status is established by
active-duty status in the military, naval, or air service and an honorable discharge or
release from active military service. Generally, persons enlisting in one of the armed
forces after September 7, 1980, and officers commissioned after October 16, 1981,
must have completed two years of active duty or the full period of their initial service
obligation to be eligible for VA health care benefits. Servicemembers discharged at
any time because of service-connected disabilities are not held to this requirement.
Also, reservists that were called to active duty and who completed the term for which


22 Ibid., p.5.
23 Ibid., p.4.
24 Veterans do not need to apply for enrollment in the VA’s health care system if they fall
into one of the following categories: veterans with a service-connected disability rated 50%
or more (percentages of disability is based upon the severity of the disability; those with a
rating of 50% or more are placed in Priority Group 1); less than one year has passed since
the veteran was discharged from military service for a disability that the military determined
was incurred or aggravated in the line of duty, but the VA has not yet rated; or the veteran
is seeking care from the VA only for a service-connected disability (even if the rating is only

10%).


25 VA Form 10-10EZ is available at [https://www.1010ez.med.va.gov/sec/vha/1010ez/
#Process].
26 38 C.F.R. §17.36 (d)(3)(iv) (2007).

they were called, and who were granted an other than dishonorable discharge, are
exempt from the 24 continuous months of active duty requirement. National Guard
members who were called to active duty by federal executive order are also exempt
from this two-year requirement if they (1) completed the term for which they were
called and (2) were granted an other than dishonorable discharge.
When not activated to full-time federal service, members of the reserve
components and National Guard have limited eligibility for VA health care services.
Members of the reserve components may be granted service-connection for any
injury they incurred or aggravated in the line of duty while attending inactive duty
training assemblies, annual training, active duty for training, or while going directly
to or returning directly from such duty. In addition, reserve component service
members may be granted service-connection for a heart attack or stoke if such an
event occurs during these same periods. The granting of service-connection makes
them eligible to receive care from the VA for those conditions. National Guard
members are not granted service-connection for any injury, heart attack, or stroke that
occurs while performing duty ordered by a governor for state emergencies or
activities.27
After veteran’s status has been established, the VA next places applicants into
one of two categories. The first group is composed of veterans with service-
connected disabilities or with incomes below an established means test. These
veterans are regarded by the VA as “high priority” veterans, and they are enrolled in
Priority Groups 1-6 (see Appendix A). Veterans enrolled in Priority Groups 1-6
include
!veterans in need of care for a service-connected disability;28
!veterans who have a compensable service-connected condition;
!veterans whose discharge or release from active military, naval, or
air service was for a compensable disability that was incurred or
aggravated in the line of duty;
!veterans who are former prisoners of war (POWs);
!veterans awarded the Purple Heart;
!veterans who have been determined by VA to be catastrophically
disabled;
!veterans of World War I;
!veterans who were exposed to hazardous agents (such as Agent
Orange in Vietnam) while on active duty; and
!veterans who have an annual income and net worth below a VA-
established means test threshold.


27 38.U.S.C. §101(24); 38 C.F.R. §3.6(c).
28 The term “service-connected” means that, with respect to disability, such disability was
incurred or aggravated in the line of duty in the active military, naval, or air service. The
VA determines whether veterans have service-connected disabilities and, for those with such
disabilities, assigns ratings from 0 to 100% based on the severity of the disability.
Percentages are assigned in increments of 10%.

The VA looks at applicants’ income and net worth to determine their specific
priority category and whether they have to pay copayments for nonservice-connected
care. In addition, veterans are asked to provide the VA with information on any
health insurance coverage they have, including coverage through employment or
through a spouse. The VA may bill these payers for treatment of conditions that are
not a result of injuries or illnesses incurred or aggravated during military service.
Appendix B provides information on what categories of veterans pay for which
services.
The second group of veterans is composed of those who do not fall into one of
the first six priority groups — primarily veterans with nonservice-connected medical
conditions and with incomes and net worth above the VA-established means test
threshold. These veterans are enrolled in Priority Group 7 or 8.29 Appendix C
provides information on income thresholds for VA health care benefits.
Operation Enduring Freedom (OEF) and Operation Iraqi Freedom
(OIF) Veterans. The National Defense Authorization Act (NDAA), FY2008 was
signed by the President (P.L. 110-181) on January 28, 2008. This act extended the
period of enrollment for VA health care from two to five years for veterans who
served in a theater of combat operations after November 11, 1998 (generally, OEF
and OIF veterans who served in a combat theater).
According to the VA, currently enrolled combat veterans will have their
enrollment eligibility period extended to five years from their most recent date of
discharge. New servicemembers discharged from active duty on or after January 28,
2003, could enroll for a period of up to five years after their most recent discharge
date from active duty. Veterans who served in a theater of combat, and who never
enrolled, and were discharged from active duty between November 11, 1998 and
January 27, 2003, may apply for this enhanced enrollment opportunity through
January 27, 2011.
Generally, new OEF and OIF veterans are assigned to Priority Group 6, unless
eligible for a higher Priority Group, and are not charged copays for medication and/or
treatment of conditions that are potentially related to their combat service. Veterans
who enroll in the VA health care system under this extended enrollment authority
will continue to be enrolled even after the five-year eligibility period ends. At the end
of the five-year period, veterans enrolled in Priority Group 6 may be re-enrolled in
Priority Group 7 or 8, depending on their service-connected disability status and
income level, and may be required to make copayments for nonservice-connected
conditions. The above criteria apply to National Guard and Reserve personnel who
were called to active duty by federal executive order and served in a theater of
combat operations after November 11, 1998.


29 The VA considers a veteran’s previous year’s total household income (both earned and
unearned income, as well as his/her spouse’s and dependent children’s income). Earned
income is usually wages received from working. Unearned income includes interest earned,
dividends received, money from retirement funds, Social Security payments, annuities, and
earnings from other assets. The number of persons in the veterans family will be factored
into the calculation to determine the applicable income threshold. 38 C.F.R. § 17.36(b)(7)
(2006).

Priority Groups and Scheduling Appointments. The VHA is mandated
to provide priority care for non-emergency outpatient medical care for any condition
of a service-connected veteran rated 50% or more, or for a veteran’s service-
connected condition.30 According to VHA policies, patients with emergency or
urgent medical needs must be provided care, or must be scheduled to receive care as
soon as practicable, independent of service-connected status, and whether care is
purchased or provided directly by the VA. Veterans who are service-connected 50%
or more need to be scheduled to be seen within 30 days of the desired date for any
condition.
Veterans who are rated less than 50% service-connected disabled, and who
require care for a service-connected condition, need to be scheduled to be seen within
30 days of the desired date. When VHA staff are in doubt as to whether the request
for care is for a service-connected condition, they are required to assume, on behalf
of the veteran, that the veteran is entitled to priority access and schedule within 30
days of the desired date.31
Veterans in other priority groups are to be scheduled to be seen within 120 days
of the desired date. According to VHA policies, all outpatient appointment requests
must be acted on as soon as possible, but no later than seven calendar days from the
date of the request. The VHA also requires that priority scheduling of any veteran
must not affect the medical care of any other previously scheduled veteran.
Furthermore, VHA guidelines state that veterans with service-connected conditions
cannot be prioritized over other veterans with more acute health care needs.32
Formulation of VHA’s Budget
Each year, VHA reviews the demand for health care services from veterans and
projects an estimate of the cost to deliver care against that demand. It utilizes the VA
Enrollee Health Care Demand Model (Demand Model) to develop estimates of
veteran enrollment, expected utilization of 55 health care services by those enrollees,
and the costs associated with that utilization. The 55 health care services include
such services as inpatient medical, surgical, and psychiatric care; ambulatory care;
pharmacy, including over the counter medications; and hearing aids and prosthetics.
The Demand Model does not include projected expenditures for long-term care
services, CHAMPVA, readjustment counseling provided primarily through Vet
Centers, the Spina Bifida program, or care for non-veterans. Because of the unique
characteristics of these programs, the budget estimates for these programs are
developed by the respective program offices.
The Demand Model also makes risk adjustments to reflect veteran enrollee’s
mortality, morbidity, and changing health care needs. It also takes into account the
veterans’ reliance on VA health care (that is, how much care veteran enrolles receive


30 VHA Directive 2006-055, October 11, 2006.
31 Ibid.
32 Ibid.

from VA versus other sources such as Medicare and private health insurance). Based
on private sector health care utilization benchmarks, the Demand Model projects
future use of health care services by veteran enrollees. These benchmarks are
adjusted for unique demographics of veterans enrolles, and health care characteristics
of the VA health care system. According to the VA, the model also generates future
trend data for health care utilization, cost, and intensity of medical services.33 These
trend data reflect historical and future changes in the entire health care industry and
are adjusted to reflect the unique attributes of the VA health care system. Figure 1
provides a conceptual overview of the Demand Model.
While the VHA actuarial model works well in a steady state environment, it
does not perform as well in a dynamic environment, such as when veterans are
returning from combat theaters and enrolling in the VA health care system.
According to VHA officials, VHA has added higher enrollee estimates to the34
Demand Model to ensure it has enough resources. However, in the long term, the
Demand Model still has limitations, because the changes in the nation’s economy and
future military conflicts could have a profound impact on predicting future veterans
enrollments and expenditures.


33 Congressional Research Service meeting with the VA on projections and reliance on VA’s
actuarial model, January 17, 2008.
34 Ibid.

Figure 1. Conceptual Overview of VA Enrollee Health Care
Demand Model


-Private Sector
-VA Expenditure Benchmark Data
Allocation Data-Enrollee
-Veteran -VA Workload Demographics,
Population DataDataMorbidity, and
-Veteran -VA Budget Reliance
Enrollment DataObligation DataAnalyses
-Enrollment -Trend Analyses -Health Care
Analyses Management
Analyses
-Trend Analyses
Enrollment Utilization Unit Cost
Projections Projections Projections
Expenditure
Projections
Source: Adapted from Testimony of Dr. Michael J. Kussman, Under Secretary for Health, Veterans
Health Administration Department of Veterans Affairs, before the Senate Committee on Veterans
Affairs, July 25, 2007.

Funding for the VHA
The VHA is funded through multiple appropriations accounts that are
supplemented by other sources of revenue. Although the appropriations account
structure has been subject to change from year to year, the appropriation accounts
used to support the VHA traditionally include medical care, medical and prosthetic
research, and medical administration. In addition, Congress also appropriates funds
for construction of medical facilities through a larger appropriations account for
construction for all VA facilities. In FY2004, “to provide better oversight and [to]
receive a more accurate accounting of funds,” Congress changed the VHA’s
appropriations structure.35 The Department of Veterans Affairs and Housing and
Urban Development and Independent Agencies Appropriations Act, 2004 (P.L. 108-

199, H.Rept. 108-401), funded VHA through four accounts: (1) medical services, (2)


medical administration, (3) medical facilities, and (4) medical and prosthetic
research. Provided below are brief descriptions of these accounts.
Medical Services
The medical services account covers expenses for furnishing inpatient and
outpatient care and treatment of veterans and certain dependents, including care and
treatment in non-VA facilities; outpatient care on a fee basis; medical supplies and
equipment; salaries and expenses of employees hired under Title 38, United States
Code; and aid to state veterans homes. In its FY2008 budget request to Congress, the
VA requested the transfer of food service operations costs from the medical facilities
appropriations to the medical services appropriations. The House and Senate
Appropriations Committees have concurred with this request.36
In its FY2009 budget request to Congress, the Administration requested the
consolidation of the medical services and medical administration account. While the
House Appropriations Committee did not concur with this request, the Senate
Appropriations Committee has consolidated the medical services and medical
administration accounts (see discussion under Senate Committee Action below).
Medical Support and Compliance
(Previously Medical Administration)
The medical support and compliance account provides funds for the expenses
in the administration of hospitals, nursing homes, and domiciliaries, billing and
coding activities, public health and environmental hazard program, quality and
performance management, medical inspection, human research oversight, training
programs and continuing education, security, volunteer operations, and human
resources.


35 U.S. Congress, Conference Committees, Consolidated Appropriations Act, 2004,
conference report to accompany H.R. 2673, 108th Cong., 1st sess., H.Rept. 108-401, p. 1036.
36 The cost of food service operations support hospital food service workers, provisions, and
supplies related to the direct care of patients.

Medical Facilities
The medical facilities account covers, among other things, expenses for the
maintenance and operation of VHA facilities; administrative expenses related to
planning, design, project management, real property acquisition and deposition,
construction, and renovation of any VHA facility; leases of facilities; and laundry
services.
Medical and Prosthetic Research
This account provides funding for VA researchers to investigate a broad array
of veteran-centric health topics, such as treatment of mental health conditions;
rehabilitation of veterans with limb loss, traumatic brain injury, and spinal cord
injury; organ transplantation; and the organization of the health care delivery system.
VA researchers receive funding not only through this account but also from the DOD,
the National Institutes of Health (NIH), and private sources.
Medical Care Collections Fund (MCCF)
In addition to direct appropriations for the above accounts, the Committees on
Appropriations include medical care cost recovery collections when considering the
amount of resources needed to provide funding for the VHA. The Consolidated
Omnibus Budget Reconciliation Act of 1985 (P.L. 99-272), enacted into law in 1986,
gave the VHA the authority to bill some veterans and most health care insurers for
nonservice-connected care provided to veterans enrolled in the VA health care
system, to help defray the cost of delivering medical services to veterans.37 This law
also established means testing for veterans seeking care for nonservice-connected
conditions. However, P.L. 99-272 did not provide the VA with specific authority to
retain the third-party payments it collected and VA was required to deposit these
third-party collections in the General Fund of the U.S. Treasury.
The Balanced Budget Act of 1997 (P.L. 105-33) gave the VHA the authority to
retain these funds in the Medical Care Collections Fund (MCCF). Instead of
returning the funds to the Treasury, the VA can use them for medical services for38
veterans without fiscal year limitations. To increase the VA’s third-party
collections, P.L. 105-33 also gave the VA the authority to change its basis of billing39
insurers from “reasonable costs” to “reasonable charges.” This change in billing
was intended to enhance VA collections to the extent that reasonable charges result


37 Veterans’ Health-Care and Compensation Rate Amendments of 1985;100 Stat. 372, 373,

383.


38 For a detailed history of funding for VHA from FY1995 to FY2004, see CRS Report
RL32732, Veterans’ Medical Care Funding FY1995-FY2004, by Sidath Viranga Panangala.
39 Under “reasonable costs,” the VA billed insurers based on its average cost to provide a
particular episode of care. Under “reasonable charges,” the VA bills insurers based on
market pricing for health care services.

in higher payments than reasonable costs.40 In FY2004, the Administration’s budget
requested consolidating several medical existing collections accounts into one
MCCF. The conferees of the Consolidated Appropriations Act of 2004 (H.Rept.
108-401) recommended that collections that would otherwise be deposited in the
Health Services Improvement Fund (former name), Veterans Extended Care
Revolving Fund (former name), Special Therapeutic and Rehabilitation Activities
Fund (former name), Medical Facilities Revolving Fund (former name), and the
Parking Revolving Fund (former name) should be deposited in MCCF.41 The
Consolidated Appropriations Act of 2005; (P.L. 108-447, H.Rept. 108-792) provided
the VA with permanent authority to deposit funds from these five accounts into the
MCCF. The funds deposited into the MCCF would be available for medical services
for veterans. These collected funds do not have to be spent in any particular fiscal
year and are available until expended.
The conferees of the FY2006 Military Construction, Military Quality of Life and
Veterans Affairs Appropriations Act (P.L. 109-114, H.Rept. 109-305) required the
VA to establish a revenue improvement demonstration project. The purpose of this
pilot project is to provide a “comprehensive restructuring of the complete revenue
cycle including cash-flow management and accounts receivable.”42 The conferees
included this provision because the Appropriations Committees were concerned that
the VHA was collecting only 41% percent of the billed amounts from third-party
insurance companies. Currently, the VHA has established a pilot Consolidated
Patient Account Center (CPAC) in VISN 6. There are eight VA medical centers
under the CPAC management initiative. In a report issued in June 2008, the
Government Accountability Office (GAO) stated that VA had ineffective controls
over medical center billings.43
As shown in Table 4, MCCF collections increased by 45%, from $1.5 billion
in FY2003 to $2.2 billion in FY2007. During this same period, first-party collections
increased by 33.6%, from $685 million to $915 million. In FY2007, first-party
collections represented approximately 41% of total MCCF collections.


40 U.S. Government Accountability Office (GAO), VA Health Care: Third-Party Charges
Based on Sound Methodology; Implementation Challenges Remain, GAO/HEHS-99-124,
June 1999.
41 For a detailed description of these former accounts, see CRS Report RL32548, Veterans’
Medical Care Appropriations and Funding Process, by Sidath Viranga Panangala.
42 U.S. Congress, Conference Committees, Military Construction, Military Quality of Life
and Veterans Affairs Appropriations Act, 2006, conference report to accompany H.R. 2528,thst

109 Congress, 1 session, H.Rept. 109-305, p. 43.


43 For details on whether medical centers under the CPAC initiative had more effective
controls over third-party billings and collections, see U.S. Government Accountability
Office, VA Health Care: Ineffective Controls over Medical Center Billings and Collections
Limit Revenue from Third- Party Insurance Companies, GAO-08-675, June 2008.

Table 4. Medical Care Collections, FY2003-FY2007
($ in thousands)
FY2003 FY2004 FY2005 FY2006 FY2007
Actual Actual Actual Actual Actual
First-party pharmacy a
copayments $576,554$623,215$648,204$723,027$760,616
First-party copayments for
inpatient and outpatient care104,994113,878118,626135,575150,964
First-party long-term careb
copayments 3,461 5,077 5,411 4,347 3,699
Third-party insurance
collectio ns 804,141 960,176 1,055,597 1,095,810 1,261,346
Enhanced use leasingc
r e ve nue 234 459 26,861 3,379 1,692
Compensated work therapyd
co llectio ns 38,834 40,488 36,516 40,081 43,296
Parking feese3,2963,3493,4433,0833,136
Compensation and pensionf
living expenses3766342,4312,0751,904
MCCF Total $1,531,890$1,747,276$1,897,089$2,007,377$2,226,653
Sources: Table prepared by CRS based on data provided by the VA, and U.S. Department of Veterans
Affairs, FY2009 Budget Submission, Medical Programs and Information Technology Programs, Vol.
2 of 4, pp. 1C-11.
Notes: The following accounts were not consolidated into the MCCF until FY2004: enhanced use
leasing revenue, compensated work therapy collections, parking fees, and compensation and pension
living expenses. Collection figures for these accounts for FY2003 are provided for comparison
purposes.
a. In FY2002, Congress created the Health Services Improvement Fund (HSIF) to collect increases
in pharmacy copayments (from $2 to $7 for a 30-day supply of outpatient medication) that went
into effect on February 4, 2002. The Consolidated Appropriations Resolution, 2003 (P.L.
108-7) granted the VA the authority to consolidate the HSIF with the MCCF and granted
permanent authority to recover copayments for outpatient medications.
b. Authority to collect long-term care copayments was established by the Millennium Health Care and
Benefits Act (P.L. 106-117). Certain veteran patients receiving extended care services from VA
providers or outside contractors are charged copayments.
c. Under the enhanced-use lease authority, the VA may lease land or buildings to the private sector
for up to 75 years. In return the VA receives fair consideration in cash and/or in-kind. Funds
received as monetary considerations may be used to provide care for veterans.
d. The compensated work therapy program is a comprehensive rehabilitation program that prepares
veterans for competitive employment and independent living. As part of their work therapy,
veterans produce items for sale or undertake subcontracts to provide certain products and/or
services, such as providing temporary staffing to a private firm. Funds collected from the sale
of these products and/or services are deposited into the MCCF.
e. The Parking program provides funds for construction and acquisition of parking garages at VA
medical facilities. The VA collects fees for use of these parking facilities.



f. Under the compensation and pension living expenses program, veterans who do not have either a
spouse or child would have their monthly pension reduced to $90 after the third month a veteran
is admitted for nursing home care. The difference between the veterans pension and the $90
is used for the operation of the VA medical facility.
FY2008 Budget Summary44
On February 5, 2007, the President submitted his FY2008 budget proposal to
Congress. The total amount requested by the Administration for the VHA for
FY2008 was $34.6 billion, a 1.93% increase in funding compared with the FY2007
enacted amount. The total amount of funding that would have been available for the
VHA under the President’s budget proposal for FY2008, including collections, was
approximately $37.0 billion (see Table 7 and Appendix E). For FY2008, the
Administration requested $27.2 billion for medical services, a $1.2 billion, or 4.8%,
increase in funding over the FY2007 enacted amount. The Administration’s budget
proposal also requested $3.4 billion for medical administration, $3.6 billion for
medical facilities, and $411 million for medical and prosthetic research (see Table
7 and Appendix E). As in FY2003, FY2004, FY2005, FY2006, and FY2007, the
Administration’ FY2008 budget request included several cost-sharing proposals.
House Action
On June 6, 2007, the House Appropriations Committee recommended $37.1
billion for the VHA for FY2008, a 9.3% increase over the FY2007 enacted amount
of $34.0 billion and 7.3% above the President’s request. The Military Construction
and Veterans Affairs appropriations bill for FY2008 (H.R. 2642, H.Rept. 110-186)
was reported out of committee on June 11.
On June 15, 2007, the House passed H.R. 2642.45 As amended, H.R. 2642
provided $29.0 billion for medical services. The MILCON-VA appropriations bill,
as amended, also provided: $3.5 billion for the medical administration account, $68.6
million above the FY2008 request and $82.6 million above the FY2007 enacted
amount; $4.1 billion for medical facilities, a 14% increase over the President’s
request; and $480 million for medical and prosthetic research, a 17% increase over
the President’s request of $411 million (see Table 7).
Senate Action
On June 14, 2007, the Senate Appropriations Committee approved its version
of the MILCON-VA appropriations bill. The bill was reported to the Senate on June


44 For a detailed description of VA Medical Care Appropriations for FY2008, see CRS
Report RL34063, Veterans’ Medical Care: FY2008 Appropriations, by Sidath Viranga
Panangala.
45 H.R. 2642 as passed by the House on June 15, 2007, was not enacted into law. Provisions
in this bill were amended and later incorporated into the Consolidated Appropriations Act,
2008 (H.R. 2764, P.L. 110-161). H.R. 2642 subsequently became the vehicle for the
Supplemental Appropriations Act, 2008 (P.L. 110-252).

18 (S. 1645, S. Rept.110-85). S. 1645, as reported, provided a total of $37.2 billion
for the VHA.
On September 6, 2007, the Senate passed H.R. 2642 with an amendment in the
nature of a substitute to reflect the Senate Appropriations Committee-approved
measure (S. 1645, S. Rept.110-85). As amended by the Senate, H.R. 2642 provided
$29.1 billion for medical services — a $3.2 billion (12.3%) increase over the
FY2007 enacted amount and $1.9 billion over the FY2008 budget request — and
$3.5 billion would have been available for medical administration, $75 million above
the FY2008 Administration’s request. H.R. 2642, as passed by the Senate, provided
$4.1 billion for medical facilities — a 14.0% increase over the FY2008 request and
1.7% less than the FY2007 enacted amount — and $500 million for medical and
prosthetic research — a 12% increase over the FY2007 enacted amount, a 22.0%
increase over the FY2008 request, and 4.2% above the House-passed amount (see
Table 7).
Consolidated Appropriations Act for FY2008
At the end of 2007, Congress passed the Consolidated Appropriations Act for
FY2008 (H.R. 2764), an omnibus measure that combined the 11 outstanding
appropriations bills for FY2008.46 H.R. 2764 was passed by the House on December
17, 2007; the Senate passed the measure the next day, December 18, with an
amendment (McConnell Amendment — adding funding for the Iraq war). The
House agreed to the McConnell Amendment on December 19. The bill was signed
into law (P.L. 110-161) on December 26. Division I of H.R. 2764 included the
Military Construction and Veterans Affairs and Related Agencies Appropriations
Act, 2008 (MILCON-VA Appropriations Act).
The MILCON-VA Appropriation Act provided $37.2 billion for VHA for
FY2008, which is $2.6 billion above the Administration’s request for FY2008 (see
Table 7). Of this amount $2.6 billion (the amount above the Administration’s
request) was designated as contingent emergency funding, and was to be available
for obligation only after the President submitted a budget request to Congress. On
January 17, 2008, the President submitted a budget request to Congress, requesting
this additional amount and designating it as an emergency requirement.
Supplemental Appropriation Act, 2008 (P.L. 110-252)
On June 30, 2008, the President signed into law the Supplemental Appropriation
Act of 2008. Among other things, this act provided $396.4 million for the
construction major projects account to complete planned construction of Level I
polytrauma rehabilitation centers identified by VA’s capital planning process. A new


46 The only appropriations bill that passed as a stand alone measure was the Department of
Defense Appropriations Act, 2008 (H.Rept. 110-434), which was signed into law on
November 13, 2007 (P.L. 110-116).

polytrauma center is under design for construction in San Antonio, Texas, and is
expected to be opened in 2011.47
FY2009 VHA Budget
On February 4, 2008, the President submitted his FY2009 budget proposal to
Congress. The Administration requested a total of $39.2 billion (excluding
collections) for VHA. This is a 5.3% increase, or a $2.0 billion increase, over the
FY2008 enacted level. Including total available resources (including medical
collections) the Administration’s budget would have provided $41.1 billion for VHA.
The President’s FY2009 budget submission also proposed to abolish the medical
administration account and consolidate these activities in the medical services
account. Under this account structure the Administration requested $34.1 billion for
the medical services account which is approximately $5 billion above the FY2008
enacted amount (Table 7). The VHA estimated an overall medical inflation rate of
4.63% for FY2009. The major cost drivers for VHA medical care are increases in
costs of goods and services beyond the control of the VHA, as well as increases in
utilization of services by existing patients, and increases in intensity of care (more
complex care).
The President’s budget proposal also requested $4.7 billion for the medical
facilities account, an increase of $561 million over the FY2008 enacted level. The
Administration’s budget proposal for FY2009 requested $442 million for the medical
and prosthetic research account, a 7.9% decrease ($38 million) below the FY2008
enacted level. According to the Senate Committee on Veterans’ Affairs, the
President’s proposal would have resulted in the loss of 49 full time positions and 294
research projects.48
As in FY2003, FY2004, FY2005, FY2006, FY2007, and FY2008. the
Administration included several cost-sharing proposals. These legislative proposals
are discussed in detail in the key budget issues section at the end of this report.
FY2009 Congressional Budget Resolution49
On March 7, 2008, the House (H.Con.Res. 312) and Senate (S.Con.Res. 70)
reported their respective budget resolutions.50 The House budget resolution provided
$48.2 billion in funding for discretionary veterans programs and $45.1 billion in
mandatory spending for FY2009. The House budget resolution also rejected health
care enrollment fees and prescription drug copayment increases as proposed by the
President. Similar to the House amounts, the Senate budget resolution provided


47 The polytrauma network of care consists of four regional Polytrauma Rehabilitation
Centers (PRC) located in Richmond, VA; Tampa, FL; Minneapolis, MN; and Palo Alto, CA.
48 Senate Committee on Veterans Affairs (majority), Views and Estimates Letter for FY2009,
to the Senate Committee on the Budget, February 22, 2008.
49 For a detailed analysis of the FY2009 budget resolution see CRS Report RL34419, The
Budget for Fiscal Year 2009, by D. Andrew Austin.
50 H.Rept. 110-543 and S.Rept. 110-039.

$48.2 billion for discretionary veterans programs including health care, and $45.1
billion for mandatory programs. The House passed its budget resolution on March
13 and the Senate passed its version the following day. After negotiations between
the House and Senate, the House agreed to an amended version of S.Con.Res. 70
(Conference Report; H.Rept. 110-659). The Senate adopted H.Rept. 110-659 on
June 4 and the House adopted the conference agreement the next day. The
conference agreement provides $48.2 billion for FY2009 for discretionary veterans’
programs, including medical care. This amount is $4.9 billion more than the FY2008
enacted level, and $3.3 billion more than the President’s budget proposal for
FY2009. The conference agreement also provides $45.1 billion in mandatory
funding for veterans programs.
House Action
On June 12, 2008, the House Committee on Appropriations, Subcommittee on
Military Construction, Veterans Affairs, and Related Agencies, marked up a draft
Military Construction and Veterans Affairs Appropriations bill. On June 24, the
House Appropriations Committee marked up the Military Construction and Veterans
Affairs Appropriations bill (H.R. 6599; H.Rept. 110-775), for FY2009 (MILCON-
VA Appropriations bill). On August 1, the House passed H.R. 6599. The House-
passed bill provided $40.8 billion for VHA, a $1.6 billion increase over the
Administration’s FY2009 request, and $3.6 billion over the FY2008 enacted amount.
This amount included $31billion for the medical services account. The committee
did not concur with the President’s proposed account structure of consolidating the
medical administration account with the medical services account. The House -
passed amount for the medical services account was 6% above the FY2008 enacted
amount (Table 7). H.R. 6599 included bill language stipulating that VA must spend
at least $3.8 billion on specialty mental health care, including Post-Traumatic Stress
Disorder (PTSD).
The MILCON-VA Appropriations bill provided $4.4 billion for the medical
support and compliance account (previously known as the medical administration
account). This amount is 25% above the FY2008 enacted amount. H.R. 6599 also
provides approximately $5 billion for the medical facilities account, a $368 million
increase over the Administration’s request, and $929 million above the FY2008
enacted level. This increase includes funding for non-recurring maintenance. The
Committee directed the VHA to use these funds to address life/safety and suicide
prevention deficiencies in mental health wards. Lastly, the House MILCON-VA
appropriations bill provided $500 million for the medical and prosthetic research
account, a 13.1 % increase over the FY2009 request, and a 4.2 % increase over the
FY2008 enacted amount (Table 7).
Construction Projects. The MILCON-VA appropriations bill (H.R. 6599)
provided $923 million for the construction major account, a 58% increase over the
FY2009 request and a 37 % decrease from the FY2008 enacted level. H.R. 6599 also
provided $991.5 million for the construction minor projects account, an increase of
200% over the FY2009 request and 57% above the FY2008 enacted amount. Of the
amount provided for the construction minor projects account, $7 million was for the
installation of alternative fueling stations at 35 VA medical centers. In total
(excluding grants for construction of state veterans cemeteries), the House-passed bill



has provided $2.1 billion for VA construction projects, including construction
projects identified under the Capital Asset Realignment for Enhanced Services
(CARES) initiative, and grants for construction of state extended care facilities. This
level of funding is a 108% increase in funding over the FY2009 request, and a 8%
decrease when compared to the FY2008 enacted amount (Table 8).
Senate Committee Action
On July 17, 2008, the Senate Appropriations Committee marked up its version
of the FY2009 Military Construction and Veterans Affairs and Related Agencies
Appropriations bill (S. 3301, S.Rept. 110-428). The Senate Appropriations
Committee recommended $41.1 billion (excluding collections) for VHA for FY2009
(see Table 7). This is a 4.8% increase over the FY2009 request, and $294 million
above the House Appropriations Committee-recommended amount. The Senate
Appropriations Committee concurred with the President’s proposal to merge the
medical services account with the medical administration account. The Committee
stated that the “current account structure has created bureaucratic confusion at the51
medical center level often slowing effective delivery of health care.” The
Committee recommended merging the medical services account with the medical
administration account in order to provide more spending flexibility to medical
center directors.
Under the proposed new account structure the Committee recommended $35.6
billion for the medical services account, a 4.4% ($1.5 billion) increase over the
FY2009 request. S. 3301, as marked up by the Committee, also provided $5.0 billion
for medical facilities. This is a 21% increase compared to the FY2008 enacted
amount, 6.4% above the FY2009 request, and $68 million below the House
Committee-recommended amount (see Table 7).
The Senate marked up MILCON-VA appropriations bill also provided $527
million for the medical and prosthetic research account. This is a 19.2% increase
over the FY2009 request and 9.8% above the FY2008 enacted amount.
Construction Projects. The Committee-recommended bill (S. 3301)
provides $1.2 billion for the construction major projects account, a 109% increase
over the FY2009 request and 32% above the House Appropriations Committee-
recommended amount. S. 3301 also provided $729 million for the construction minor
projects account, a 26% decrease from the House Committee recommended amount
(see Table 8). In total, S. 3301 provided $2.2 billion for VA construction projects
(excluding grants for state veterans cemeteries), including projects identified under
the CARES initiative.


51 U.S. Congress, Senate Committee on Appropriations, Military Construction, and Veterans
Affairs, and Related Agencies Appropriations Bill, 2009, report to accompany S. 3301, 110thnd
Cong., 2 sess., S.Rept. 110-428, p. 40.

Final MILCON-VA Appropriations Act of 2009
Prior to the start of FY2009, a compromised version of H.R. 6599 and S. 3301
was included as Division E in the Consolidated Security, Disaster Assistance, and
Continuing Appropriations Act, 2009 (H.R. 2638). The bill was signed into law on
September 30, 2008, as P.L. 110-329. The MILCON-VA Appropriations Act of

2009 provides a total of $40.9 billion (excluding collections) for VHA (see Table 7).


This includes $30.9 billion for the medical services account, a 6.4% increase over the
FY2008 enacted amount and 20% over the FY2007 enacted amount. Of the amount
allocated to the medical services account not less than $3.8 billion is required to be
spent on mental health care, and $250 million for the rural health outreach initiatives.
The final MILCON-VA Appropriations Act also provides $4.4 billion for the
medical support and compliance account (previously known as the medical
administration account). This amount is 26.5% above the FY2008 enacted amount
and 29.8% over the FY2007 enacted amount. P.L 110-329 also provides $5 billion
for the medical services account, a $368 million over the FY2009 request and $929
million over the FY2008 enacted amount. Lastly, the MILCON-VA Appropriations
Act provides $510 million for the medical and prosthetic research account.
Construction Projects. P.L. 110-329 provides $1.8 billion for VA
construction projects (excluding grants for construction of state veterans cemeteries)
(See Table 8). This amount includes $923 million for the construction major
projects account, $741 million for the construction minor projects account, and $175
million for grants for construction state extended care facilities.
Major Areas of Committee Interest
Mental Health Care and Traumatic Brain Injuries. The mental health
care of servicemembers and veterans returning from current OEF and OIF operations
has become a major area interest to congressional committees. The final
MILCON-VA Appropriations Act of 2009 includes bill language requiring the VA
to spend at least $3.8 billion for mental health care. Table 5 provides a break down
of VA spending for mental health care, including suicide prevention, PTSD
treatment, and substance abuse treatment by both treatment site and program. VA
estimates that it will spend approximately $3.9 billion in FY2009 for VA mental
health care. This is would be a 19% increase in spending from the FY2007 funding
level. The FY2009 estimated spending level includes $319 million for PTSD
treatment and $15.5 million for suicide prevention initiatives.
The House and Senate Appropriations Committees have expressed concern with
regard to the diagnosis and treatment of Traumatic Brain Injuries (TBI). The Senate
Appropriations Committee has noted that many soldiers returning from Iraq and
Afghanistan have faced a combination of PTSD and TBI, and that the relationship
between the two injuries is not well understood. It has included report language
encouraging the VA to increase the level of funding for the National Centers for
Post-Traumatic Stress Disorder by least $2 million above the requested amount, to
expand programs that would ensure the proper understanding of the combined impact
of PTSD and TBI.



Table 6 provides VA spending levels for TBI. In FY2009, of the total amount
allocated for TBI, about 88% would be spent on treatment of non-OIF and OIF
veterans with TBI because they make-up the majority of TBI patients using the VA
health care system.
Table 5. Mental Health Spending, FY2007-FY2009
($ in thousands)
FY2007 FY2008 FY2009
Descr ip tio n Actua l Estima te Est i ma t e
Treatment Modality
Inpatient Hospital$972,524 $1,042,554 $1,083,898
Psychiatric Residential Rehabilitation Treatment$195,777 $209,899 $218,223
Outpatient$1,421,340 $1,523,990 $1,584,424
VA Domiciliary$334,214 $395,690 $443,553
Mental Health Initiative$325,835 $370,029 $531,283
Mental Health Total$3,249,690 $3,542,162 $3,861,381
Major Characteristic of Program
Serious Mental Illness (SMI) Post-Traumatic
Stress Disorder (PTSD)$222,518 $265,633 $319,032
SMI- Substance Abuse Treatment (SABT)$436,748 $497,580 $583,074
SMI - Other than PTSD & SABT$2,222,706 $2,427,515 $2,600,832
Subtotal, SMI$2,881,972 $3,190,728 $3,502,938
Other Mental Health (Non-SMI)$367,718 $351,434 $358,443
Total Mental Health$3,249,690 $3,542,162 $3,861,381
Mental Health Information Included Above
Suicide Prevention$8,635$15,472$15,509
PTSD (OIF/OEF)$34,920$44,724$54,829
PTSD (Non-OIF/OEF)$187,598$220,909$264,203
Total PTSD$222,518$265,633$319,032
Vet Centers — Readjustment Counseling$110,016 $157,954 $173,380
Source: Department of Veterans Affairs, Congressional Budget Submission (2008) vol. 2 of 4.



Table 6. Traumatic Brain Injury (TBI) Spending, FY2007-FY2009
($ in thousands)
FY2007 FY2008 FY2009
Description Actua l Est i ma t e Estima te
OIF and OEF Veterans$15,826$19,230$24,890
Non OIF and OEF Veterans $150,063$170,020$187,254
Total $165,889$189,250$212,144
Source: Department of Veterans Affairs, Congressional Budget Submission (2008) Vol 2 of 4.
Priority Group 8 Veterans. The Veterans Health Care Eligibility Reform
Act of 1996 (P.L. 104-262) included language that stipulated that medical care to
veterans will be furnished to the extent appropriations were made available by
Congress on an annual basis. Based on this statutory authority, the Secretary of
Veterans Affairs announced on January 17, 2003 that VA would temporarily suspend
enrolling Priority Group 8 veterans.52 Those who were in VA’s health care system
prior to January 17, 2003 were not affected by this suspension.
The House Appropriations Committee, in its report to accompany H.R. 6599
(H.Rept. 110-775) states that the VA “should do everything possible to increase
access to medical care for all our veterans, but not in a manner that will negatively
impact the medical care [provided to] currently enrolled patients.”53 The Committee
is directing the VA to increase Priority Group 8 enrollment by 10%, and has provided
$568 million above the Administration’s request for this purpose.
Likewise the Senate Appropriations Committee has included $350 million
within the medical services account so that the VA could “raise the income threshold
to an amount commensurate with the increased level of funding” in order to enroll
more Priority Group 8 veterans.54
The final MILCON-VA Appropriations Act of 2009 (P.L. 110-329) provides
$375 million within the medical services account to increase the enrollment of
Priority Group 8 veterans whose incomes exceed the current VA means test and
geographic means test thresholds by 10% or less.


52 Department of Veterans Affairs, “Enrollment — Provision of Hospital and Outpatient
Care to Veterans Subpriorities of Priority Categories 7 and 8 and Annual Enrollment Level
Decision; Final Rule,” 68 Federal Register 2670, January 17, 2003.
53 U.S. Congress, House Committee on Appropriations, Military Construction, Veterans
Affairs, and Related Agencies Appropriations Bill, 2009, report to accompany H.R. 6599,thnd

110 Cong., 2 sess., H.Rept. 110-775, p. 39.


54 U.S. Congress, Senate Committee on Appropriations, Military Construction, and Veterans
Affairs, and Related Agencies Appropriations Bill, 2009, report to accompany S. 3301, 110thnd
Cong., 2 sess., S.Rept. 110-428, p. 50.

Beneficiary Travel Mileage Reimbursement. In general, the beneficiary
travel program reimburses certain veterans for the cost of travel to VA medical
facilities when seeking health care. P.L. 76-432, passed by Congress on March 14,
1940, mandated VA to pay either the actual travel expenses, or an allowance based
upon the mileage traveled by any veteran traveling to and from a VA facility or other
place for the purpose of examination, treatment, or care. P.L. 85-857, signed into law
on September 2, 1958, authorized VA to pay necessary travel expenses to any veteran
traveling to or from a VA facility or other place in connection with vocational
rehabilitation counseling or for the purpose of examination, treatment, or care.
However, this law changed VA’s travel reimbursement into a discretionary authority
by stating that VA “may pay” expenses of travel.
Due to rapidly increasing costs of the beneficiary travel program, on March 12,

1987, VA published final regulations that sharply curtailed eligibility for the55


beneficiary travel program. Under these regulations beneficiary travel payments to
eligible veterans were paid when specialized modes of transportation, such as
ambulance or wheelchair van, were medically required. In addition, payment was
authorized for travel in conjunction with compensation and pension examinations,
as well as travel beyond a 100-mile radius from the nearest VA medical care facility.
It also authorized the VA to provide transportation costs, when necessary, to transfer
any veteran from one health care facility (either a VA or contract care facility) to
another in order to continue care paid for by the VA. The following transportation
costs were not authorized under these regulations:
!Cost of travel by privately owned vehicle in any amount in excess of
the cost of such travel by public transportation unless public
transportation was not reasonably accessible or was medically
inadvisable.
!Cost of travel in excess of the actual expense incurred by any person
as certified by that person in writing.
!Cost of routine travel in conjunction with admission for domiciliary
care, or travel for family members of veterans receiving mental
health services from the VA except for such travel performed
beyond a 100-mile radius from the nearest VA medical care facility.
Travel expenses of all other veterans were not authorized unless the veterans
were able to present clear and convincing evidence to show the inability to pay the
cost of transportation; or except when medically-indicated ambulance transportation
was claimed and an administrative determination was made regarding the veteran’s
ability to bear the cost of such transportation.56


55 Veterans Administration, “Transportation of Claimants and Beneficiaries,” final
regulations, 52 FR 7575-01, March 12, 1987. These regulations became effective on April

13, 1987.


56 Ibid.

The Veterans’ Benefits and Services Act of 1988 (P.L. 100-322, section 108),
in large part restored VA travel reimbursement benefits. It required that if VA
provides any beneficiary travel reimbursement under Section 111 of Title 38 U.S.C.
in any given fiscal year, then payments must be provided in that year in the case of
travel for health care services for all the categories of beneficiaries specified in the
statute. In order to limit the overall cost of this program, the law imposed a $3
one-way deductible applicable to all travel, except for veterans otherwise eligible for
beneficiary travel reimbursement who are traveling by special modes of
transportation such as ambulance, air ambulance, wheelchair van, or to receive a
compensation and pension examination. In order to limit the overall impact on
veterans whose clinical needs dictate frequent travel for VA medical care, an $18-
per-calendar-month cap on the deductible was imposed for those veterans who are
pre-approved as needing to travel on a frequent basis.
Veterans may qualify for travel reimbursement if (1) they have a
service-connected disability rated 30% or more; (2) they are traveling for treatment
of a service-connected disability; (3) they receive a VA pension; (4) their income
does not exceed the maximum annual VA pension rate; or (5) they are traveling for
a scheduled compensation or pension examination.
The FY2008 Appropriations Act (P.L. 110-161) provided funding for VA to
increase the beneficiary travel mileage reimbursement rate from 11 cents per mile to
28.5 cents per mile. The increase went into effect on February 1, 2008. While
increasing the payment, VA, as mandated by law, also increased proportionately the
deductible amounts applied to certain mileage reimbursements. The new deductibles
are $7.77 for a one way trip, $15.54 for a round trip, with a maximum of $46.62 per
calendar month. However, these deductibles can be waived if they cause a financial
hardship to the veteran.
VA regulation with respect to waiving deductibles. Under current
regulations 38 CFR 17.144 (b) when it is determined that charging a deductible
would cause a severe financial hardship to the veteran, the VA could waive the
deductible requirement. Currently, VA determines severe financial hardship as (1)
annual income for the year immediately preceding the application for benefits does
not exceed the maximum annual rate of pension which would be payable if the
person were eligible for pension; or (2) the person is able to demonstrate that due to
circumstances such as loss of employment, or incurrence of a disability, income in
the year of application will not exceed the maximum annual rate of pension which
would be payable if the person were eligible for pension.
With the rise in gasoline prices, the House and Senate Appropriations
Committees included report language to further increase the mileage reimbursement
rate. The House Appropriations Committee provided an additional $100 million to
increase the beneficiary travel reimbursement mileage rate to 41.5 cents per mile
from the current rate of 28.5 cents per mile. The Senate Appropriations Committee
included an additional $138 million above the Administration’s request to raise the
mileage reimbursement rate to 50.5 cents per mile, which raises VA’s reimbursement
rate to conform with the General Services Administration’s (GSA) rate at which



federal employees are reimbursed when using private automobiles for official
business.57
The final MILCON-VA Appropriations Act of 2009 provided an additional
$133 million to increase the mileage reimbursement rate to 41.5 cents a mile and
included an administrative provision to freeze the deductible at the FY2008 levels
(i.e. $7.77 for a one way trip, $15.54 for a round trip, with a maximum of $46.62 per
calendar month).
The Veterans' Mental Health and Other Care Improvements Act of 2008 (S.
2162, P.L. 110-387), which was signed into law on October 10, contained a provision
that would require the VA to raise its current reimbursement rate to conform with the
GSA rate at which federal employees are reimbursed when using private automobiles
for official business. The provision would also amend current law that allows the
VA to raise or lower the deductible for reimbursements in proportion to a change in
the mileage rate. The VA will no longer be able to increase the deductible rate unless
new deductible rates are mandated by Congress. Also it would reinstate the amount
of the deductible for the beneficiary travel reimbursement program to the amount in
effect prior to February 1, 2008, when VA increased the deductible rate (i.e $3 for a
one way trip, $6 for a round trip, with a maximum of $18 per calendar month).


57 It should be noted that on August 1, 2008, the GSA raised the mileage reimbursement rate
to 58.5 cents a mile [http://www.gsa.gov/mileage].

Table 7. VHA Appropriations by Account, FY2007-FY2009
($ in thousands)
FY2009
Senate
FY2009 C o mmi t t e e FY2009
FY2007FY2008FY2008FY2008 FY2008FY2009 House ( S.Rept.Enacted
ProgramEnactedRequest House Senate EnactedRequest(H.R. 6599) 110-428) (P.L. 110-329)
cal Services$25,518,254$27,167,671$29,031,400$29,104,220$27,167,671$34,075,503$30,854,270$35,590,432$30,969,903
ergency appropriations U.S. Troopa
iness, Veterans Care, Katrina$400,778
ery (P.L. 110-28)
tingent emergency (P.L. 110-161) $1,936,549
total Medical Services$25,919,032$27,167,671$29,031,400$29,104,220$29,104,220$34,075,503$30,854,270$35,590,432$30,969,903
dical Support and Compliance$3,177,968$3,442,000$3,510,600$3,517,000$3,442,000 $4,400,000 $4,450,000
iously Medical Administration)
ergency appropriations U.S. Troop
iki/CRS-RL34598iness, Veterans Care, Katrina$250,000
g/wery (P.L. 110-28)
s.ortingent emergency (P.L. 110-161) $75,000
leaktotal Medical Support and Compliance$3,427,968$3,442,000$3,510,600$3,517,000$3,517,000 $4,400,000$4,450,000
eviously Medical Administration)
://wikidical Facilities$3,569,533$3,592,000$4,100,000$4,092,000$3,592,000$4,661,000$5,029,000$4,961,000$5,029,000
httpergency appropriations U.S. Troop
iness, Veterans Care, Katrina$595,000
ery (P.L. 110-28)
tingent emergency (P.L. 110-161) $508,000
a cilities $4, 164,533 $3,592,000 $4,100,000 $4,092,000 $4,100,000 $4,661,000 $5,029,000 $4,961,000 $5,029,000
dical and Prosthetic Research $413,980$411,000$480,000$500,000$411,000$442,000$500,000$526,800$510,000
ergency appropriations U.S. Troop
iness, Veterans Care, Katrina$32,500
ery (P.L. 110-28)
tingent emergency (P.L. 110-161) $69,000
total Medical and Prosthetic Research $446,480$411,000$480,000$500,000$480,000$442,000$500,000$526,800$510,000
al VHA appropriations (without$33,958,013$34,612,671$37,122,000$37,213,220$37,201,220$39,178,503$40,783,270$41,078,232$40,958,903
)
cal care cost collections (MCCF)$2,329,000$2,414,000$2,414,000$2,414,000$2,414,000$1,879,000$2,544,000$2,544,000$2,544,000
al VHA appropriations (with$36,287,013$37,026,671$39,536,000$39,627,220$39,615,220$41,057,503$43,327,270$43,622,232$43,502,903


)

: Table prepared by the Congressional Research Service based on H.Rept. 109-464; H.Rept. 109-494; S.Rept. 109-286; P.L. 110-5; H.Rept. 110-64; S.Rept. 110-37; H.Rept.
60; Congressional Record, vol. 153, (May 24, 2007), pp.H5786-H5787; H.Rept. 110-186; S.Rept. 110-85; Congressional Record, vol. 153, (September 7, 2007), S11271-S11278;
essional Record, vol. 153 (December 17, 2007), pp. H16249-H16431; H.Rept. 110-775; S.Rept. 110-428; and Congressional Record, vol. 154, (September 24, 2008), pp.H9868-
.L. 110-161 (H.R. 2764) transferred $66 million from the FY2007 medical services account to the construction major, projects account for FY2007.


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Table 8. Appropriations for VA Construction Projects,
FY2008-FY2009
($ in thousands)
FY2009 Senate
FY2009 C o mmi t t e e FY2009
FY2008FY2008FY2008FY2008 FY2009 House(S.Rept.Enacted
Request House Senate enacted Request(H.R. 6599) 110-428) (P.L. 110-329)
nstruction, major projectsa$727,400$1,410,800$727,400$727,400$581,582$923,382$1,217,747$923,382
ntingent emergency
. 110-161)$341,700
ergency appropriations
. 110-252)— — — $396,377
total construction, major
ects $727,400 $1,410,800 $727,400 $1,465,477 $581,582 $923,382 $1,217,747 $923,382
iki/CRS-RL34598nstruction, minor projectsb$233,396$615,000$751,398$233,396$329,418$991,492$729,418$741,534
g/wntingent emergency
s.or. 110-161)$397,139
leak
total construction, minor
://wikiects $233,396 $615,000 $751,398 $630,535 $329,418 $991,492 $729,418 $741,534
httpts for construction of state
ded care facilitiesc$85,000$165,000$250,000$85,000$85,000$165,000 $250,000$175,000
ntingent emergency
. 110-161) $80,000
total Grants for construction of
e facilities$85,000$165,000$250,000$165,000$85,000$165,000$250,000$175,000
tal $1,045,796$2,190,800$1,728,798$2,261,012$996,000$2,079,874$2,197,165$1,839,916
: Table prepared by CRS based on H.Rept. 110-186; S.Rept. 110-85; Congressional Record, vol. 153 (September 7, 2007), S11271-S11278; Congressional Record, vol. 153
ber 17, 2007), pp. H16249-H16431; H.Rept. 110-775; S.Rept. 110-428; and Congressional Record, vol. 154, (September 24, 2008), pp. H9868-H9869.
This table excludes grants for construction of state veterans cemeteries.
his account provides funds for constructing, altering, extending, and improving any VA facility, including planning, assessments of needs, architectural and engineering services,
CARES projects, and site acquisition, where the estimated cost of a project is $10 million or more or where funds for a project were made available in a previous major project
appropriation. Emphasis is placed on correction of safety code deficiencies in existing VA medical facilities.



his account provides funds for constructing, altering, extending and improving any VA facility, including planning, architectural and engineering services, CARES projects, and
site acquisition, where the estimated cost of a project is less than $10 million. VA medical center projects that need minor improvements costing $500,000 or more are funded
from this account.
his account provides grants to states to acquire or construct state nursing home and domiciliary facilities, and to remodel, modify, or alter existing hospitals, nursing homes, and
domiciliary facilities in state homes. A grant may not exceed 65% of the total cost of the project. P.L. 102-585 granted permanent authority for this program, and P.L. 104-262
added Adult Day Health Care as another level of care that may be provided by state homes. This is a no-year account.


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Key Budget Issues
In its FY2009 budget request, the Administration has put forward several
legislative proposals. These proposals are similar to previous ones included in the
Administration’s budget requests for FY2003, FY2004, FY2005, FY2006, FY2007,58
and FY2008 and rejected by Congress each year. Similar to the FY2008 budget
proposals, revenue from the proposals in the FY2009 budget request would not be
deposited in the Medical Care Collections Fund (MCCF), but would be classified as
mandatory receipts to the Treasury. None of these proposals have received any
consideration by the House and Senate Appropriation Committees.
The President’s FY2009 budget request includes three major policy proposals:
!Assess a tiered annual enrollment fee for all Priority 7 and 8 veterans
based on the family income of the veteran.
!Increase pharmaceutical copayments from $8 to $15 (for each 30-
day prescription) for all enrolled veterans in Priority Groups 7 and

8.


!Bill veterans receiving treatment for nonservice-connected
conditions for the entire copayment amount.
A detailed description of these budget proposals follows.
Assess an Annual Enrollment Fee
The Administration is proposing a tiered annual enrollment fee, which is
structured to charge $250 for Priority 7 and 8 veterans with family incomes from
$50,000 to $74,999; $500 for those with family incomes from $75,000 to $99,999;
and $750 for those with family incomes equal to or greater than $100,000. The VA
has estimated that this proposal would contribute more than $129 million to the
Treasury annually, beginning in FY2010, and will increase revenue by $1.1 billion
over 10 years.
Increase Pharmacy Copayments
The Administration proposes increasing the pharmacy copayments from $8 to
$15 for all enrolled Priority Group 7 and Priority Group 8 veterans whenever they
obtain medication from the VA on an outpatient basis for the treatment of a


58 In FY2003, the VA proposed a $1,500 deductible for all Priority Group 7 veterans for
nonservice-connected disabilities. For proposals included in FY2004, FY2005, FY2006,
FY2007,and FY2008, see CRS Report RL32548, Veterans’ Medical Care Appropriations
and Funding Process, by Sidath Viranga Panangala; CRS Report RL32975, Veterans’
Medical Care: FY2006 Appropriations, by Sidath Viranga Panangala; CRS Report
RL33409, Veterans’ Medical Care: FY2007 Appropriations, by Sidath Viranga Panangala;
and CRS Report RL34063, Veterans’ Medical Care: FY2008 Appropriations, by Sidath
Viranga Panangala.

nonservice-connected condition. The Administration put forward this proposal in its
FY2004, FY2005, FY2006, FY2007, and FY2008 budget requests as well, but did
not receive any approval from Congress. At present, veterans in Priority Groups 2-8
pay $8 for a 30-day supply of medication, including over-the-counter medications.59
The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) authorized the
VA to charge most veterans $2 for each 30-day supply of medication furnished on
an outpatient basis for treatment of a nonservice-connected condition. The Veterans
Millennium Health Care and Benefits Act of 1999 (P.L. 106-117) authorized the VA
to increase the medication copayment amount and establish annual caps on the total
amount paid, to eliminate financial hardship for veterans enrolled in Priority Groups
2-6.60 When veterans reach the annual cap, they continue to receive medications
without making a copayment.
On November 15, 2005, the VHA issued a directive stating that effective
January 1, 2006, the medication co-payment will be increased to $8 for each 30-day
supply of medication furnished on an outpatient basis for treatment of a nonservice-
connected condition, and that the annual cap for veterans enrolled in Priority Groups
2-6 will be $960.61 There is no cap for veterans in Priority Groups 7 and 8 (see
Appendixes B and C). The VA estimates that if the current proposal to raise the
copayment were enacted, it would contribute $355 million to the Treasury in FY2009
and will increase revenue by $3.7 billion over 10 years.
Impact of Fee Proposals. According to the VA, in FY2009, as many as
444,000 veterans would choose not to enroll in the VA health care system and
146,000 unique veteran patients would not seek VA health care if enrollment fees are
imposed and pharmacy copays are increased.
Third-Party Offset of First-Party Debt
The Administration is requesting that Congress amend the VA’s statutory
authority by eliminating the practice of reducing first-party copayment debts with


59 The following veterans are exempt from paying copayments: veterans receiving a pension
for a nonservice-connected disability from the VA; veterans with incomes below $11,181
(if no dependents) and $14,643 (with one dependent plus $1,909 for each additional
dependent); veterans receiving care for conditions such as Agent Orange or Military Sexual
Trauma, and combat veterans within five years of discharge; and veterans who are former
POWs.
60 This law allowed the VA to increase the copayment amount for each 30-day or less supply
of medication provided on an outpatient basis (other than medication administered during
treatment) for treatment of a nonservice-connected condition. Accordingly, the VA
increased the copayment amount from $2 to $7. The medication copayment charge for each
subsequent calendar year after 2002 is established by using the prescription drug component
of the Medical Consumer Price Index. When an increase occurs, the copayment increases
in whole dollar amounts. The amount of the annual cap increases $120 for each $1 increase
in the copayment amount.
61 VHA Directive 2005-052, Implementation of Medication Copayment Changes, November

15, 2005.



third-party health insurance collections. The VA asserts that this proposal would
align the VA with the DOD health care system for military retirees and with the
private sector.
With the enactment of P.L. 99-272 in 1986, Congress authorized the VA to
collect payments from third-party health insurers for the treatment of veterans with
nonservice-connected disabilities; it also established copayments from veterans for
this care.62 Under current law, the VA is authorized to collect from third-party health
insurers to offset the cost of medical care furnished to a veteran for the treatment of
a nonservice-connected condition.63 If the VA treats an insured veteran for a
nonservice-connected disability, and the veteran is also determined by the VA to
have copayment responsibilities, the VA will apply the payment collected from the
insurer to satisfy the veteran’s copayment debt related to that treatment.
Under the current copayment billing process, in cases where the cost of a
veteran’s medical care for a nonservice-connected condition appears to qualify for
billing under reimbursable insurance and copayment, the VA medical facilities sends
the bill to the insurance provider. The veteran’s copayment obligation is placed on
hold for 90 days pending payment from the third-party payer. If no payment is
received from the third-party payer within 90 days, a bill is sent to the veteran for the
full copayment amount. However, when insurers reimburse the VA after the 90-day
period, the VA must absorb the cost of additional staff time for processing a refund
if the veteran has already paid the bill. On all insurance policies, the entire amount
of the claim payment is applied first to the copayment. The veteran is then billed
only for the portion of the copayment not covered by the insurance reimbursement
and the portion of the copayment for services not covered by the veteran’s insurance
plan (see Figure 2).


62 Consolidated Omnibus Budget Reconciliation Act of 1985, 100 Stat. 372, 373, 383.
63 38 U.S.C. §1729; 38 U.S.C. §1710; and 38 U.S.C. 1722A.

Figure 2. Present Copayment Process


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Department of Veterans Affairs.

Under the Administration’s proposal, veterans receiving medical care services
for treatment of nonservice-connected disabilities will receive a bill for their entire
copayment, and the copayment will not be reduced by collection recoveries from
third-party health plans. This proposal would apply to all veterans who make
copayments.
According to VA estimates, this proposal will increase revenue by $44 million
in FY2009 and $415 million over 10 years. The House and Senate Appropriations
Committees have not addressed this issue because it is an issue in the purview of the
authorizing committees.



Appendix A. Priority Groups and Their
Eligibility Criteria
Priority Group 1
Veterans with service-connected disabilities rated 50% or more disabling
Priority Group 2
Veterans with service-connected disabilities rated 30% or 40% disabling
Priority Group 3
Veterans who are former POWs
Veterans awarded the Purple Hearta
Veterans whose discharge was for a disability that was incurred or aggravated in the
line of duty
Veterans with service-connected disabilities rated 10% or 20% disabling
Veterans awarded special eligibility classification under Title 38, U.S. C., Section

1151, “benefits for individuals disabled by treatment or vocational rehabilitation”


Priority Group 4
Veterans who are receiving aid and attendance or housebound benefits
Veterans who have been determined by the VA to be catastrophically disabled
Priority Group 5
Nonservice-connected disabled veterans and noncompensable service-connected
veterans rated 0% disabled whose annual income and net worth are below the
established VA Means Test thresholds
Veterans receiving VA pension benefits
Veterans eligible for Medicaid benefits
Priority Group 6
Compensable 0% service-connected disabled veterans
World War I veterans
Mexican Border War veterans
Veterans solely seeking care for disorders associated with
— exposure to herbicides while serving in Vietnam; or
— ionizing radiation during atmospheric testing or during the occupation of Hiroshima
and Nagasaki; or
— for disorders associated with service in the Gulf War; or
— for any illness associated with service in combat in a war after the Gulf War or
during a period of hostility after November 11, 1998.
Priority Group 7
Veterans who agree to pay specified copayments who have income and/or net worth
above the VA Means Test threshold and income below the HUD geographic index



— Subpriority a: Noncompensable 0% service-connected disabled veterans who were
enrolled in the VA Health Care System on a specified date and who have remained
enrolled since that date
— Subpriority c: Nonservice-connected disabled veterans who were enrolled in the
VA Health Care System on a specified date and who have remained enrolled since that
date.
— Subpriority e: Noncompensable 0% service-connected disabled veterans not
included in Subpriority a above
— Subpriority g: Nonservice-connected disabled veterans not included in Subpriority
c above
Priority Group 8
Veterans who agree to pay specified copayments with income and/or net worth above
the VA Means Test threshold and the HUD geographic index
— Subpriority a: Noncompensable 0% service-connected disabled veterans enrolled as
of January 16, 2003 and who have remained enrolled since that date
— Subpriority c: Nonservice-connected disabled veterans enrolled as of January 16,
2003 and who have remained enrolled since that date
— Subpriority e: Noncompensable 0% service-connected disabled veterans applying
for enrollment after January 16, 2003
Source: Department of Veterans Affairs.
Notes: Service-connected disability means with respect to disability, that such disability was incurred
or aggravated in the line of duty in the active military, naval, or air service.
a. Veterans in receipt of a Purple Heart are in Priority Group 3. This change occurred with the
enactment of the Veterans Millennium Health Care and Benefits Act (P.L. 106-117) on Nov.
30, 1999.



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Appendix B. Copayments for Health Care Services: 2008
Inpatient careOutpatient careOutpatient medicationLong-term care services
($10/day + $1024 for first 90 days ($15 Primary Care;($8 per 30-day supply; (Institutional nursing home care
and $512 after 90 days based on$50 Specialty Care; $0Priority Groups 2-6units, respite care, geriatric
365-day period)for x-rays, lab,calendar year cap - $960)evaluation - $0-97 per day.
immunizations, etc.)Non-institutional respite care,
geriatric evaluation, adult day
healthcare - $15 per day;
domiciliary care - $5 per day)
rity Group 1NONONONO
vice-connected disabilities rated 50%
ore disabling)
iki/CRS-RL34598rity Groups 2 and 3NONOYESNO
g/ws with service-connecteda
s.orilities rated 10% - 40% disabling)
leakrity Group 4 NONONONO
rules apply if placed from lower
://wikirity group based on VHA
httpophic disability determination
rity Group 5b NONOYESYES
rity Group 6cNONONONO
rity Group 7dYESYESYESYES
rity Group 8eYESYESYESYES
Table prepared by CRS based on information from the Department of Veterans Affairs.
medication copayments if medication is for a service-connected disability. Former POWs are exempt from all medications copayments.
edication or long-term care copayments if veterans is in receipt of VA pension or has an income below applicable pension threshold.
riority Group 6 are veterans claiming exposure to Agent Orange; veterans claiming exposure to environmental contaminants; veterans exposed to Ionizing Radiation; combat veterans
within five years of discharge from the military; veterans who participated in Project 112/SHAD; veterans claiming military sexual trauma; and veterans with head and neck
cancer who received nasopharyngeal radium treatment while in the military are subject to copayments when their treatment or medication is not related to their exposure or



CRS-41
experience. The initial registry examination and follow-up visits to receive results of the examination are not billed to the health insurance carrier and are not subject to
copayments. However, care provided that is not related to exposure, if it is nonservice-connected, will be billed to the insurance carrier and copayments can apply.
ority Group 7a and 7c veterans have income above the VA Means Test threshold but below the Geographic Means Test threshold and are responsible for 20% of the inpatient
copayment and 20% of the inpatient per diem copayment. The geographic means test copayment reduction does not apply to outpatient and medication copayment, and veterans
will be assessed the full applicable copayment charges.
ority Group 8a and 8c veterans have income above the VA Means Test threshold and above the Geographic Means Test threshold. Veterans enrolled in this priority group are
responsible for the full inpatient copayment and the inpatient per diem copayment for care of their nonservice-connected conditions. Veterans in this priority group are also
responsible for outpatient and medication copayments for care of their nonservice-connected conditions.
Combat Veterans Enhanced Eligibility for Health Care Benefits: Combat veterans discharged from active duty on or after January 28, 2003, are eligible for enrollment in
rity Group 6 for five years following discharge unless eligible for a higher enrollment priority. Combat veterans discharged from active duty before January 28, 2003, who apply
rollment on or after January 28, 2008, are eligible for enrollment in Priority Group 6 until January 27, 2011. After the special eligibility period ends, these veterans will be
ned to the appropriate priority group and will be subject to copayments if applicable. Copayments are applicable for Priority Group 6 combat veteran enrollees for care related
ndition that is congenital or developmental (e.g., scoliosis) that existed before military service (unless aggravated by combat service) or has a specific etiology that began after
iki/CRS-RL34598y service, such as a common cold, etc.


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Appendix C. Financial Income Thresholds
for VA Health Care Benefits, Calender Year 2008
Free VA prescriptions andFree VA inpatient and
travel benefits for veteransoutpatient care for veterans
Veterans with — with incomes of — with incomes of —
No dependents$11,181 or less$28,429 or less
1 dependent$14,643 or less$34,117 or less
2 dependents$16,552 or less$36,026 or less
3 dependents$18,461 or less$37,935 or less
4 dependents$20,370 or less$39,844 or less
For each additional
dependent, add:$1,909$1,909
Source: Department of Veterans Affairs.



CRS-43
Appendix D. VHA Appropriations for FY2005 and FY2006
( $ in thousands)
FY2005 FY2005 FY2005 FY2005 FY2006 FY2006 FY2006 FY2006
ProgramRequestHouseSenateEnactedRequestHouseSenate Enacted
cal services $19,498,600$19,498,600a$19,316,995$19,995,141$20,995,141$21,331,011$21,322,141
emental appropriations (P.L. 108-324)$38,283 38,283
emental appropriations975,000b975,000c 1,500,000d1,500,000e
ergency appropriations 1,977,000f 1,977,000g1,225,000h
ergency appropriations- Gulf Coast Hurricanes
. 109-148) 198,265 198,265
ergency appropriations-Avian Flu Pandemic
. 109-148) 27,000 27,000
iki/CRS-RL34598
g/wtotal medical services1,013,28320,473,60020,998,60020,855,27822,197,40620,995,14123,308,01122,772,406
s.orcal administration 4,705,0004,705,0004,667,3604,517,8744,134,8742,858,4422,858,442
leak
emental appropriations (P.L. 108-324)1,940 1,940
://wikitotal medical administration1,9404,705,000 4,705,0004,669,3004,517,8744,134,8742,858,4422,858,442
httpacilities3,745,0003,745,000 3,715,0403,297,6693,297,6693,297,6693,297,669
emental appropriations (P.L. 108-324)46,909 46,909
edical facilities46,9093,745,0003,745,0003,761,9493,297,6693,297,6693,297,6693,297,669
cal and prosthetic research384,770384,770405,593402,348393,000393,000412,000412,000
ormation technology 1,456,821
i26,748,600
tal VHA appropriations (without collections)28,195,50228,308,37028,854,19329,688,87530,405,94928,820,68431,332,94329,340,517
t collection (MCCF)j2,002,0002,002,0002,002,0001,985,9842,170,0002,170,0002,170,0002,170,000
tal: VHA (appropriations and collections)$30,197,502$31,310,370$30,856,193$31,674,859$32,575,949$30,990,684$33,502,943$31,510,517
Table prepared by the Congressional Research Service based on H.Rept. 108-674; S.Rept. 108-353; H.Rept. 109-95; S.Rept. 109-105; H.Rept. 109-305; H.Rept. 109-359;
ouse Appropriations Committee data.



CRS-44
Appropriation amounts for FY2005 adjusted to account for the 0.8% across-the-board reduction in most discretionary accounts as called for in Division J, Section 122 (a)(1)
. 108-447. Supplemental appropriations for FY2005 are not subject to the 0.8% across-the-board reductions. Appropriation amounts for FY2006 are not subject to any cross-the-
ctions as stipulated in Division B, Title III, Section 3801(c)(2) of P.L. 109-148.
his amount includes $1.2 billion designated as an emergency requirement.
June 30, 2005, the Administration requested an additional $975 million for medical services for FY2005.
n June 30, 2005, the House passed H.R. 3130.
n June 29, 2005, the Senate passed an amendment to H.R. 2361, the Department of the Interior, Environment, and Related Agencies Appropriations bill, 2006 to add $1.5 billion
in emergency funds for medical services.
n August 2, 2005, the FY2006 Department of the Interior, Environment, and Related Agencies appropriations bill (H.R. 2361, P.L. 109-54) was signed into law.
July 14, 2005, the Administration requested an additional $1.977 billion for medical services for FY2006.
July 21, 2005, the Senate Committee on Appropriations reported H.R. 2528 favorably out of committee (S.Rept. 109-105) and designated this amount as an emergency
appropriatio n.
November 18, 2005, the House and Senate adopted the conference report (H.Rept. 109-305) to accompany H.R. 2528 and designated this amount as an emergency appropriation.
his amount includes funding for medical services, medical administration, and medical facilities.
ical Care Cost Collection Fund (MCCF) receipts are restored to the VHA as an indefinite budget authority equal to the revenue collected, estimated to be $1.985 billion in
FY2005, $2.17 billion in FY2006, and $2.33 billion in FY2007.


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CRS-45
Appendix E. VHA Appropriations for FY2007 and FY2008
( $ in thousands)
FY2007FY2007FY2007FY2007FY2008FY2008FY2008FY2008
ProgramrequestHouseSenateenacted requestHouseSenate enacted
ervices $25,512,000 $25,412,000 $28,689,000 $25,518,254 $27,167,671 $29,031,400 $29,104,220 $27,167,671
ergency appropriations U.S. Troop
eadiness, Veterans Care, Katrina Recovery,
d Iraq Accountability a
. 110-28) 414,982454,131400,778
ontingent emergency (P.L. 110-161) 1,936,549
ubtotal medical services25,512,00025,826,98229,143,13125,919,03227,167,67129,031,40029,104,22029,104,220
cal administration3,177,0003,277,000 3,177,9683,442,0003,510,6003,517,0003,442,000
ergency appropriations
. 110-28) 256,300250,000250,000
ontingent emergency (P.L. 110-161)75,000
iki/CRS-RL34598ubtotal medical administration3,177,0003,533,300250,000 3,427,9683,442,0003,510,6003,517,0003,517,000
g/wacilities 3 ,569,000 3,594,000 3,569,000 3,569,533 3,592,000 4,100,000 4,092,000 3,592,000
s.orergency appropriations
leak. 110-28) 595,000595,000595,000
://wikiontingent emergency (P.L. 110-161) 508,000
httpedical facilities3,569,0004,189,0004,164,0004,164,5333,592,0004,100,0004,092,0004,100,000
cal and prosthetic research399,000412,000412,000413,980411,000480,000500,000411,000
ergency appropriations
. 110-28) 35,00030,00032,500
ontingent emergency (P.L. 110-161) 69,000
ubtotal medical and prosthetic research399,000 447,000442,000446,480411,000480,000500,000480,000
tal VHA appropriations (without
lectio ns) 32,657,000 33,996,282 33,999,131 33,958,013 34,612,671 37,122,000 37,213,220 37,201,220
cal care cost collection (MCCF)2,329,0002,329,0002,329,0002,329,0002,414,0002,414,0002,414,0002,414,000
otal: VHA (appropriations and collections)$34,986,000$36,325,282$36,328,131$36,287,013$37,026,671$39,536,000$39,627,220$39,615,220
: Table prepared by the Congressional Research Service based on H.Rept. 109-95; S.Rept. 109-105; H.Rept. 109-305; H.Rept. 109-359; H.Rept. 109-464; H.Rept. 109-
S.Rept. 109-286; P.L. 110-5; H.Rept. 110-64; S.Rept. 110-37; H.Rept. 110-60; Congressional Record, vol. 153, (May 24, 2007), H5786-H5787; H.Rept. 110-186; S.Rept.
85; Congressional Record, vol. 153, (September 7, 2007), S11271-S11278; and Congressional Record, vol. 153 (December 17, 2007), H16249-H16431.
te: FY2008 enacted does not include funding included in the Supplemental Appropriation Act, 2008 (P.L. 110-252).
.L. 110-161 (H.R. 2764) transferred $66 million from the FY2007 medical services account to the construction major, projects account for FY2007.