Veterans' Medical Care: FY2006 Appropriations

Congressional research reportJan 17, 2006

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Order Code RL32975

CRS Report for Congress

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Veterans’ Medical Care:

FY2006 Appropriations

Updated January 17, 2006

name redacted

Analyst in Social Legislation

Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

Veterans’ Medical Care: FY2006 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. VA provides these benefits to veterans

through three major operating units: the Veterans Health Administration (VHA), the

Veterans Benefits Administration (VBA) and the National Cemetery Administration

(NCA). VHA is primarily a direct service provider of primary care, specialized care,

and related medical and social support services to veterans through an integrated

health care system.

The President’s FY2006 budget requested $30.4 billion for VHA: $20.0 billion

for medical services, $4.5 billion for medical administration, $3.3 billion for medical

facilities, and $393 million for medical and prosthetic research. VHA medical care

collections (e.g., copays, third-party insurance payments) for FY2006 are expected

to be $2.2 billion.

On May 26, 2005, the House passed its version of H.R. 2528, the Military

Quality of Life and Veterans Affairs and Related Agencies appropriations bill for

FY2006. This bill provided $28.8 billion for VHA. On June 23, 2005, VA

announced a budget shortfall of more than $1 billion from its FY2005 enacted level

for veterans health programs. On August 2, 2005, the Department of the Interior,

Environment, and Related Agencies Appropriations Act (P.L. 109-54) was signed

into law, providing $1.5 billion in supplemental appropriations for veterans medical

services for FY2005.

On September 22, 2005, the Senate passed its version of H.R. 2528, the Military

Construction and Veterans Affairs and Related Agencies appropriations bill for

FY2006. The Senate appropriated a total of $31.3 billion for VHA.

On November 30, 2005, the Military Construction, Military Quality of Life and

Veterans Affairs Appropriations Act, 2006 (P.L.109-114) was signed into law. This

act provided $22.5 billion for medical services, of which $1.2 billion was designated

as an emergency appropriation. P.L. 109-114 also appropriated $2.9 billion for

medical administration, $3.3 billion for medical facilities, and $412 million for

medical and prosthetic research. On December 30, 2005, the Department of Defense

Appropriations Act, 2006 (P.L.109-148, H.Rept. 109-359) was signed into law,

providing an additional $225 million for VHA for FY2006 and excluding VA

programs from a 1% across-the-board rescission for all non-emergency discretionary

programs. The total amount of funds appropriated for VHA for FY2006 is $29.3

billion. The total amount of funds available for VHA is $31.5 billion, including $2.2

billion in collections.

In its FY2006 budget submission to Congress, the Administration proposed

several legislative and regulatory changes to increase certain copayments and other

cost-sharing charges for certain veterans. P.L.109-114 did not include any of the

Administration’s cost-sharing proposals for VHA. This report will be not be

updated.

Contents

Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The Federal Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Changes in Appropriation Committee Jurisdictions . . . . . . . . . . . . . . . 3

VHA Health Care Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Funding for VHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

FY2005 Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

FY2006 VHA Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

President’s FY2006 Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

House and Senate Budget Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

FY2006 House Appropriations Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

FY2005 and FY2006 Budget Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

FY2006 Senate Appropriations Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

FY2006 Conference Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Gulf Coast Hurricanes and Avian Flu Pandemic Preparation . . . . . . . . . . . 13

Analysis of Funding for VHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Key Budget Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Changes in Cost-Sharing for Health Services . . . . . . . . . . . . . . . . . . . . . . . 17

Changes in Long-Term Care Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Legislative Proposals to Change the Cost-Sharing Structure . . . . . . . . . . . . . . . 17

Assess an Annual Enrollment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Increase Pharmacy Copayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Impact of the Annual Enrollment Fee and Increase in

Pharmacy Copayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Exempt Copayments for Hospice Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Authorize VA to Pay for Emergency Care for Insured Veterans . . . . . . . . . 21

Legislative Proposals to Change Long-Term Care Services . . . . . . . . . . . . . . . . 21

Revise Eligibility Criteria for Long-Term Care and Per-Diem Payments . . 21

Place a One-Year Moratorium on Grants for State Extended Care

Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Exempt Former Prisoners of War (POWs) from Long-Term Care

Copayments

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Eliminate Mandatory Long-Term Care Daily Census Requirements . . . . . 24

Appendix 1. Priority Groups and Their Eligibility Criteria . . . . . . . . . . . . . . . . 26

Appendix 2. Veterans’ Payments for Health Care Services . . . . . . . . . . . . . . . . 27

Appendix 3. VHA’s New Account Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Medical Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Medical Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Medical and Prosthetic Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Medical Care Collections Fund (MCCF) . . . . . . . . . . . . . . . . . . . . . . . 29

List of Tables

Table 1. VHA Appropriations for FY2004, FY2005, and FY2006 . . . . . . . . . . 15

Veterans’ Medical Care:

FY2006 Appropriations

Most Recent Developments

On November 18, 2005, the House voted to adopt the conference report

(H.Rept. 109-305) to accompany the Military Construction, Military Quality of Life

and Veterans Affairs Appropriations Act, 2006.1 The Senate adopted H.Rept. 109305 by unanimous consent that same day. The Military Construction, Military

Quality of Life and Veterans Affairs Appropriations Act, 2006 (MIL-CON-QUALVA Appropriations Act, P.L.109-114) was signed into law by the President on

November 30, 2005. The MIL-CON-QUAL-VA Appropriations Act appropriated

$22.5 billion for medical services, of which $1.2 billion was designated as an

emergency appropriation.2 Furthermore, P.L.109-114 appropriated $2.9 billion for

medical administration, $3.3 billion for medical facilities, and $412 million for

medical and prosthetic research. The MIL-CON-QUAL-VA Appropriations Act did

not recommend any of the fee increases proposed by the President.

On December 19, 2005, the House adopted the conference report (H.Rept. 109359) to accompany the FY2006 Department of Defense Appropriations bill (H.R.

2863). The Senate agreed to the conference report on December 21, 2005. The

conference agreement includes $225 million for the Veterans Health Administration

(VHA) to address recovery activities related to the hurricanes in the Gulf of Mexico,

and to prepare for a possible pandemic influenza outbreak, and excludes the

Department of Veterans Affairs (VA) programs from a 1% across-the-board

rescission for all non-emergency discretionary programs.3 The Department of

Defense Appropriations Act, 2006 (P.L. 109-148) was signed into law on December

30, 2005. With the enactment of P.L. 109-148, the total amount of funds

appropriated for VHA is $29.3 billion. The total amount of funds available for VHA

The House and Senate Appropriations Committees agreed that in FY2006 the conference

agreement would fund the programs contained in the Senate version of the bill, and that next

year the conference agreement would fund programs in the House version of the bill. In the

conference report it stated “This Act may be cited as the Military Construction, Military

Quality of Life and Veterans Affairs Appropriations Act, 2006.” However, the enrolled

version of the bill had the title as “Military Quality of Life and Veterans Affairs

Appropriations Act, 2006.” The conference report (H.Rept. 109-359) to accompanying

Department of Defense Appropriations bill (H.R. 2863, P.L. 109-148) made a technical

correction to reflect the correct title of the bill.

By designating funding as an emergency requirement, it is not subject to enforcement

procedures under the congressional budget process.

VHA and VA will be used interchangeably throughout this report to refer to VHA.

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is $31.5 billion, including $2.2 billion in collections (copays and third-party

insurance payments).

Background

The Department of Veterans Affairs (VA) provides benefits to veterans who

meet certain eligibility rules. Benefits to veterans range from disability compensation

and pensions, education, training and rehabilitation services, hospital and medical

care, and other benefits, such as home loan guarantees and death benefits that cover

burial expenses. 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 programs. The Veterans

Benefits Administration (VBA) is responsible for providing compensation, pensions,

and education assistance among other things. The National Cemetery Administration

(NCA) is responsible for maintaining national veterans cemeteries.

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

FY2005, discretionary budget authority accounted for approximately 48% of the total

VA budget authority, with most of this discretionary funding going toward

supporting VA medical care.

VHA operates the largest direct health care delivery system in the nation.4 In

FY2004, VHA operated 157 hospitals, 134 nursing homes, 42 residential

rehabilitation treatment centers, and 862 ambulatory care and community-based

outpatient clinics. VHA also pays for care provided to veterans by independent

providers and practitioners on a fee basis under certain circumstances. In addition,

VHA provides grants for construction of state-owned nursing homes and domiciliary

facilities, and collaborates with the Department of Defense (DOD) in sharing health

care resources and services.

During FY2004, VHA provided medical services to an estimated 4.7 million

unique veteran patients, a caseload that is expected to reach approximately 4.8

million in FY2005. According to VHA, this number will decrease to approximately

4.7 million by the end of FY2006.5 The total number of outpatient visits reached

49.9 million during FY2004, and is projected to increase to 52.8 million in FY2005

and 55.8 million in FY2006. In FY2004, VHA spent approximately 56% of its

medical care obligations on outpatient care.

Established in 1946 as the Department of Medicine and Surgery, succeeded in 1989 by the

Veterans Health Services and Research Administration, renamed the Veterans Health

Administration in 1991.

These are unduplicated veteran patients; this number and projections exclude

Readjustment Counseling, State Home, Civilian Health and Medical Program of VA

(CHAMPVA), Spina Bifida, Foreign Medical Program and non-veterans. Data provided by

VA.

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In addition, VHA manages the largest medical education and health professions

training program in the United States. Veterans’ health care facilities are affiliated

with 107 medical schools, 55 dental schools and more than 1,000 other schools

offering students allied and associated education degrees or certificates in 40 health

profession disciplines. In FY2004, over 84,000 health care professionals received

training in VA medical centers.6

This report provides: (1) a basic overview of the federal appropriation process;

(2) a brief overview of VHA’s enrollment process and its enrollment priority groups;

(3) a brief summary of funding levels for VHA for FY2005; (4) a discussion of the

FY2005 and FY2006 budget shortfall; (5) a discussion of supplemental

appropriations for expenses related to Gulf Coast hurricanes and avian flu

preparation; and (6) an analysis of total VHA funding for FY2006, followed by a

discussion of the Administration’s major budget proposals for FY2006.

The Federal Budget

In general, the federal budget process begins with the submission of the

President’s budget request to Congress. Following this submission, the Budget

Committees of the House and Senate develop the annual budget resolution, which

sets forth aggregate spending and revenue levels, by functional levels of spending,

for the upcoming fiscal year and at least the following four fiscal years.7 The budget

resolution is not binding and does not allocate funds among specific programs or

accounts, but the major program assumptions underlying the functional amounts are

often discussed in the accompanying report.8 The House and Senate Appropriations

Committees subdivide their allocations among their respective subcommittees, which

are each responsible for one of the regular appropriations acts. Authorizing

committees for certain programs may also consider legislation that will affect

spending under their programs. A committee has the discretion to decide on the

legislative changes to be recommended. It is not bound by the program changes

recommended or assumed by the Budget Committees in the reports accompanying

the budget resolution.

Changes in Appropriation Committee Jurisdictions. At the beginning

of the 109th Congress, both the House and Senate Appropriations Committees

reorganized their respective subcommittees.

The House Committee on

Appropriations reduced its number of subcommittees to ten from the original thirteen

subcommittees. The Senate Committee on Appropriations reduced its number of

subcommittees to twelve from the original thirteen subcommittees. The House

Subcommittee on Military Quality of Life and Veterans Affairs and Related Agencies

received jurisdiction over funding for VA programs, among other things. Similarly,

the Senate Subcommittee on Military Construction and Veterans Affairs received

For a detailed description of veterans’ health care issues, see CRS Report RL32961,

Veterans’ Health Care Issues in the 109th Congress, by (name redacted).

Specifically, budget function 700 includes funding for VA benefits and services.

For more information on the formulation of the budget resolution, see CRS Report 98-512,

Formulation and Content of the Budget Resolution, by Bill Heniff, Jr.

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jurisdiction over appropriations for VA programs among other things. Prior to this

restructuring, appropriations legislation for VA programs was the responsibility of

the House and Senate Veterans Affairs, Housing and Urban Development, and

Independent Agencies Subcommittees.

VHA Health Care Enrollment

To understand VA’s medical care appropriations and the Administration’s major

policy proposals discussed later in this report, it is important to understand VA’s

enrollment process and its enrollment priority groups. The Veterans’ Health Care

Eligibility Reform Act of 1996, 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 instituted 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.”9

For most veterans, entry into the veterans’ health care system begins with

application for enrollment.10 A veteran may apply for enrollment at any time during

the year. Eligibility for VA health care is primarily based 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 a honorable discharge or release from active

military service.

After “veterans’ status” has been established ,VA next places applicants into one

of two categories. The first group in general is composed of veterans with serviceconnected disabilities or with lower incomes. These veterans are regarded by VA

as “high priority” veterans, and they are enrolled in Priority Groups 1-6 (see

Appendix 1). Veterans enrolled in Priority Groups 1-6 include:

veterans in need of care for a service-connected disability;11

veterans who have a compensable service-connected condition;

H.Rept. 104-690.

Veterans do not need to apply for enrollment in VA’s health care system if they fall into

one of the following categories: veterans with a service-connected disability rated 50% or

more (percentage ratings represent the average impairment in earning capacity resulting

from diseases and injuries encountered as a result of or incident to military service; those

with a rating of 50% or more are placed in Priority Group 1); less than one year has passed

since the veteran was discharged from military service for a disability that the military

determined was incurred or aggravated in the line of duty, but the VA has not yet rated; or

the veteran is seeking care from VA for only a service-connected disability (even if the

rating is only 10%).

The term “service-connected” means, with respect to disability, that such disability was

incurred or aggravated in line of duty in the active military, naval, or air service. VA

determines whether veterans have service-connected disabilities, and for those with such

disabilities, assigns ratings from 0 to 100 percent based on the severity of the disability.

Percentages are assigned in increments of 10 percent.

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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 prisoner of wars (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 annual income and net worth below a VAestablished means test threshold.

VA also 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 VA with information on any health

insurance coverage they have — including coverage through employment or through

a spouse. 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 2

provides information on what categories of veterans pay for which services.

The second group is composed of veterans who do not fall into one of the first

six priority groups. These veterans are primarily those with nonservice-connected

conditions and with incomes and net worth above the VA established means test

threshold, and in general these veterans are enrolled in Priority Group 7 or 8.

Funding for VHA

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, traditionally the appropriation accounts used to

support VHA 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. Furthermore, the Committees on Appropriations include medical care cost

recovery collections when considering the amount of resources needed to provide

funding for VHA. VHA is authorized 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. The

Balanced Budget Act of 1997 (P.L. 105-33) gave VHA the authority to retain these

funds in the Medical Care Collections Fund (MCCF). Instead of returning these

funds to the Treasury, VA can use this for medical services for veterans without

fiscal year limitations.12

For a detailed history of funding for VHA from FY1995 to FY2004, see CRS Report

RL32732, Veterans’ Medical Care Funding FY1995-FY2004, by (name redacted).

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FY2005 Budget Summary

The Consolidated Appropriations Act, 2005 (P.L. 108-447)13 14 appropriated

$28.1 billion in FY2005 for VHA. As shown in Table 1, P.L. 108-447 appropriated

$19.3 billion to finance medical services, $4.7 billion for medical administration,

$3.7 billion for medical facilities, and $402 million for medical and prosthetic

research. The Consolidated Appropriations Act, 2005, also included $370 million

from the construction major account and $182 million from the construction minor

account for Capital Asset Realignment for Enhanced Services (CARES)-related

activities.15 It should be noted that these amounts are not included in the total VHA

budget since construction major and construction minor accounts are funded through

separate construction accounts. The Consolidated Appropriations Act, 2005, did not

approve the Administration’s proposal to fund VHA through an alternative account

structure, and did not include any copayment changes that were proposed in the

President’s budget request.16

On October 13, 2004, the Military Construction Appropriations and Emergency

Hurricane Supplemental Appropriations Act, 2005 (P.L. 108-324, H.Rept. 108-773)

was signed into law. As enumerated in Table 1, this bill provided an additional $87

million for VHA for FY2005. On August 2, 2005, the FY2006 Department of the

Interior, Environment, and Related Agencies appropriations bill (P.L. 109-54,

H.Rept. 109-188) was signed into law. P.L.109-54 provided $1.5 billion in

supplemental appropriations for veterans medical services for FY2005, with

carryover authority for FY2006 as well. This action was taken by Congress in

response to the FY2005 budget shortfall of more than $1 billion announced by the

Administration (see discussion under FY2005 and FY2006 budget shortfall).

The total amount appropriated for VHA for FY2005 was $29.7 billion. As

shown in Table 1, this included $20.9 billion for medical services, $4.7 billion for

medical administration, $3.8 billion for medical facilities, and $402 million to

finance medical and prosthetic research. Furthermore, $2.0 billion in medical care

cost collections (e.g., copays and third-party insurance payments ) was available for

the medical services account. Therefore, the total amount of funds available for

VHA for FY2005 was $31.7 billion.

U.S. Congress, Conference Committees, Consolidated Appropriations Act, 2005,

conference report to accompany H.R. 4818, 108th Cong., 2nd sess., H.Rept. 108-792.

The Consolidated Appropriations Act, 2005, was signed into law on Dec. 8, 2004.

For a detailed description of the Capital Asset Realignment for Enhanced Services

(CARES) program, see CRS Report RL32961, Veterans’ Health Care Issues in the 109th

Congress, by (name redacted).

For a detailed description of the FY2005 appropriations for VHA, see CRS Report

RL32548, Veterans’ Medical Care Appropriations and Funding Process, by (name redacted

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FY2006 VHA Budget

President’s FY2006 Budget

The President’s FY2006 budget requested $30.4 billion for VHA: $22.2 billion

for medical services, $4.5 billion for medical administration, $3.3 billion for medical

facilities, and $393 million for medical and prosthetic research. VHA medical care

collections (e.g., copays, third-party insurance payments) for FY2006 are expected

to be $2.2 billion. (A description of each of these accounts is given in Appendix 3).17

House and Senate Budget Resolutions

On March 17, 2005 the House passed H.Con.Res. 95 (H.Rept. 109-17),

providing $31.7 billion for VA’s discretionary programs and $37.1 billion for

mandatory programs. The Senate approved its bill, S.Con.Res. 18, on the same day

and provided $68.9 billion for both discretionary and mandatory programs.18 The

House-passed budget resolution included a directive to the House Committee on

Veterans’ Affairs to reduce the level of direct spending on veterans’ programs by

$155 million for FY2006, but the Senate version did not.

On April 28, 2005, House and Senate conferees concluded negotiations on

H.Con.Res. 95 (H.Rept. 109-62), the FY2006 budget resolution. The conference

agreement includes $31.8 billion in budget authority for VA discretionary programs

including veterans’ health care. This amount included $410 million over the

President’s recommended level of $31.4 billion for VA’s discretionary programs.

The conference agreement did not include any language directing the House and

Senate Committees on Veterans’ Affairs to reduce direct spending for veterans

programs.

FY2006 House Appropriations Bill

On May 23, 2005, the House Committee on Appropriations reported H.R. 2528,

(H.Rept. 109-95) making appropriations for Military Quality of Life and Veterans

Affairs and Related Agencies for FY2006 (MIL-QUAL appropriations bill). The

House passed H.R. 2528 on May 26, 2005. The MIL-QUAL appropriations bill

appropriated $28.8 billion for VHA. Under the House-passed version of H.R. 2528,

the total amount of funds available for VHA would be $31.0 billion, including $2.2

billion in collections.

H.R. 2528 provided $21.0 billion for medical services. The Committee

designated $2.2 billion of this recommended amount for speciality mental health

care. According to the committee report, the Committee took the unusual step of

fencing off these funds for one category of treatment because the Committee

The terms “President’s budget request” and the “Administration’s budget request” will

be used interchangeably throughout this report to refer to the same document.

There is no Senate report to accompany S.Con.Res. 18.

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recognizes the need to dedicate resources for this treatment, and wants to be assured

that funding for mental health care will not be used for other purposes.19

The MIL-QUAL appropriations bill also provided $4.1 billion for medical

administration, a $534 million decrease from the FY2005 enacted level and $383

million less than the Administration’s request. Most of this reduction is from VHA’s

information technology programs including the HealtheVet-VistA project.20 The

House Appropriations Committee recommended $3.3 billion for medical facilities,

a decrease of $464 million from FY2005 and the same as the President’s request.

Furthermore, the committee recommended $393 million for medical and prosthetic

research, the same as the Administration’s request and $9.3 million less than the

FY2005 enacted level (see Table 1). The committee report language stated that VA

should dedicate at least 20% of its research budget towards mental health research

programs. Furthermore, H.R. 2528 appropriated $607 million for construction major

projects and $209 million for construction minor projects, the same as the President’s

request for these accounts. The MIL-QUAL appropriations bill provided $25.0

million for Grants for Construction of State Extended Care Facilities. This is $79

million less than the FY2005 enacted amount. The Administration’s budget did not

request any funding for this program (see discussion below). It should be noted that

these amounts are not included in the total VHA budget since construction major21,

construction minor, and grants for construction of state extended care facilities

accounts are funded through separate construction accounts.

FY2005 and FY2006 Budget Shortfall

On June 23, 2005, at a hearing of the House Veterans Affairs Committee the

Administration announced that the increased medical care cost for FY2005 was about

$1 billion more than the FY2005 enacted amount. At a hearing before the House

Appropriations Subcommittee on Military Quality of Life and Veteran Affairs on

June 28, 2005, the Secretary testified that for FY2006 veterans’ health care programs

would need $1.1 to $1.6 billion more than the FY2006 President’s request. On June

29, 2005 the Senate passed H.R. 2361 (H.Rept. 109-80) making appropriations for

the Department of the Interior, Environment and Related Agencies for FY2006.

Included in this bill was $1.5 billion in “emergency appropriations” for veterans’

medical services for FY2005.

On June 30, 2005, the Administration submitted a supplemental appropriations

request to Congress requesting an additional $975 million for medical services for

FY2005. This amount includes $273 million for increased workload due to new

U.S. Congress, House Committee on Appropriations, Military Quality of Life and

Veterans Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R.

2528, 109th Congress, 1st session, H.Rept. 109-95, p. 53.

HealtheVet-VistA is a next generation computerized outpatient and inpatient information

system based on VA’s current Veterans Health Information Systems and Technology

Architecture (VistA). In general, VistA is an electronic medical record.

Construction major projects are capital projects, where the estimated cost of a project is

$7 million or more, and Construction minor projects are capital projects, which have a minor

improvement component greater than $500,000 and total project costs less than $7 million.

CRS-9

veterans returning from Iraq and Afghanistan. When developing its budget for

FY2005 VA did not forecast the impact of the extended operations in Iraq and

Afghanistan. The FY2005 budget assumed that only 23,533 veteran patients from

and Iraq and Afghanistan would be entering the VA health care system; VA now

estimates this number to be 103,000. Furthermore, the total requested amount

includes $226 million for veterans long-term care, $200 million for increased

workload in Priority Groups 1-6 veterans, $58 million for reducing the backlog of

veterans on waiting lists, $39 million for health care needs of dependents of 100%

service-connected veterans, $84 million for purchase of emergency medical

equipment, and $95 million for increased fuel and utility costs. Soon after the

Administration presented its budget request, the House passed H.R. 3130 providing

$975 million in supplemental FY2005 appropriations for veterans medical services,

equal to the administration’s request. Although the bill does not specifically direct

how the money should be spent, it is expected that the $975 million would be

distributed as recommended by the administration.

On July 14, 2005, the Administration submitted a budget amendment for

FY2006 requesting an additional $1.97 billion for VA medical services. This amount

includes $276 million for increased workload due to returning veterans from Iraq and

Afghanistan and $600 million for veterans long-term care services. When

developing its FY2006 budget request the Administration underestimated the demand

for long-term care services. The budget assumed that the average daily census level

for long-term care would be 9,795; VA now estimates that this level should be

11,500.22 Moreover, the budget amendment includes $152 million for reducing the

backlog of veterans on waiting lists for medical appointments, $249 million to

address increases in the number of patients, $400 million to address increases in

utilization of services by veterans already receiving care from VA, and $300 million

to replenish the carryover funds from FY2005. When developing its FY2006 budget

request the Administration believed that it could carryover about $300 million from

FY2005 into FY2006. It should be also noted that this budget amendment assumes

the fee increases proposed in the President’s FY2006 budget request.23

In response to the FY2005 budget shortfall for VA medical services, on July 26,

2005, the conferees of the Department of the Interior, Environment and Related

Agencies, Appropriations bill, 2006 (H.R. 2361, H.Rept. 109-188) provided $1.5

billion in supplemental appropriations for VA medical services for FY2005. The bill

included language that would allow VA to carryover any unused funds into FY2006.

The House passed H.R. 2361 on July 28, 2005, and the Senate passed the measure

a day later. No further action was taken on H.R. 3130 during the first session of the

109th Congress because H.R. 2361 provided the additional funding needed for

Average daily census is the average number of people served on an inpatient basis on a

single day during the reporting period.

At a House Veterans Affairs Committee Hearing on July 21, 2005, the Under Secretary

for Health, Department of Veterans Affairs testified that “the total monetary effect of those

— or appropriation effect of the fee increases — was approximately $1 billion. And, in

absence of that, in addition to the $1.977 billion that we’ve come forward with the

presidential budget amendment request for, an additional $1 billion would be necessary.”

CRS-10

FY2005. The FY2006 Department of the Interior, Environment, and Related

Agencies appropriations bill (P.L. 109-54) was signed into law on August 2, 2005.

FY2006 Senate Appropriations Bill

On July 21, 2005, the Senate Committee on Appropriations reported out of

committee H.R. 2528 (S.Rept. 109-105) making appropriations for Military

Construction and Veterans Affairs and Related Agencies for FY2006 (MIL-CON

appropriations bill). This bill appropriated approximately $31.3 billion for VHA,

including collections (Table 1). The total amount recommended for VHA is

composed of $23.3 billion for medical services including $1.97 billion in

“emergency appropriations” as requested by the President’s budget amendment,24

$2.9 billion for medical administration, $3.3 billion for medical facilities, $412

million for medical and prosthetic research, and $1.5 billion for information

technology. Under the MIL-CON appropriations bill, the total amount of funding

available for VHA would be $33.5 billion, including $2.2 billion in collections. It

should be noted here that the Committee has included bill language creating a

separate account for information technology for the entire VA and not specifically

for VHA. This would separate information technology from the medical

administration account. According to the committee report this new account

structure will help VA to better organize its entire information technology program

and more accurately display and report VA’s information technology efforts.

The MIL-CON appropriations bill has recommended $607 million for

construction major projects and $209 million for construction minor projects, the

same as the President’s request and the House-passed funding levels for these

accounts. Moreover, the MIL-CON appropriations bill provides $104 million for

grants for construction of state extended care facilities. This amount is the same as

the FY2005 enacted level and $79 million above the House-passed amount. The

Administration’s budget did not request any funding for this program (see discussion

below). It should be noted that these amounts are not included in the total VHA

budget because construction major, construction minor, and grants for construction

of state extended care facilities accounts are funded through separate construction

accounts.

Furthermore, the Committee did not approve any of the Administration’s fee

proposals. According to the committee report:

The Committee is not supportive of these new proposals which would force

hundreds of thousands of needy veterans to leave the VA system. To this end,

the Committee recommendation reflects the real fiscal needs of the VA without

charging the veteran population to make up the shortfall and has included direct

appropriations to cover the differences. In future budget submissions, the VA

should request a funding level that adequately represents the real needs of the

veterans in the VA system without devising new fees. Therefore, the Committee

directs that the VA not implement any of the new policy proposals, as submitted

By designating funding as an emergency requirement it is not subject to enforcement

procedures under the congressional budget process.

CRS-11

in the budget request, without concurrence from the Committees on

Appropriations in both Houses of Congress.25

The Senate passed the MIL-CON appropriations bill on September 22, 2005.

The Senate-passed version of H.R. 2528, among other things, included language that

would require the VA to submit to the House and Senate Veterans’ Affairs and

Appropriations Committees a report on any budget shortfall totaling 2% or more of

VA’s total discretionary budget in any fiscal year.

FY2006 Conference Agreement

On November 18, 2005, the House voted to adopt the conference report

(H.Rept. 109-305) making appropriations for Military Quality of Life, Military

Construction, Veterans Affairs, and Related Agencies for FY2006 (MIL-CONQUAL-VA Appropriations Act). The Senate adopted H.Rept. 109-305 by unanimous

consent that same day. The MIL-CON-QUAL-VA Appropriations Act (P.L.109-114)

was signed into law by the President on November 30, 2005.

The MIL-CON-QUAL-VA Appropriations Act appropriated $22.5 billion for

medical services (not shown in Table 1). According to the conference report

language, this amount would be available only if an official budget request is

transmitted by the President to Congress that revises the President’s budget

amendment of July 14, 2005, and designates the entire $1.2 billion as an emergency

requirement.26 The President’s budget amendment had requested almost $2.0 billion

for medical services (see the discussion under FY2005 and FY2006 budget shortfall).

However, the conference committee provided $1.2 billion. This reduction could be

attributed to the $525 million carryover appropriations from the FY2005

supplemental appropriations (P.L.109-54) and reductions from other VHA accounts.

The conferees for the MIL-CON-QUAL-VA Appropriations Act included bill

language that requires VA spend at least $2.2 billion of the VA medical services

budget for specialty mental health care. As stated in the conference report, the

conferees are concerned that mental health care is one of the most critical needs of

veterans returning from Operation Iraqi Freedom (OIF) and Operation Enduring

Freedom(OEF).27 It is estimated that of the total VHA budget for FY2006

approximately $464 million would be spent to treat about 110,000 OIF and OEF

veterans.

The conference report also includes language that requires VHA to designate

certain specialized medical treatment facilities for mental health and post traumatic

stress disorder (PTSD) as “Centers of Excellence.” According to the conference

report, centers will be established at the Waco Veterans Administration Medical

U.S. Congress, Senate Committee on Appropriations, Military Construction and Veterans

Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R. 2528,

109th Cong., 1st sess., S.Rept. 109-105, p. 48.

U.S. Congress, Conference Committees, Military Quality of Life and Veterans Affairs

Appropriations Act, 2006, conference report to accompany H.R. 2528, 109th Cong., 1st sess.,

H.Rept. 109-305, p.13.

Ibid.p.39.

CRS-12

Center (VAMC), in Texas; San Diego VAMC, in California; and the Canandaigua

VAMC, in New York. The conferees directed VA to submit a report to the

Appropriations Committees outlining the progress made in this area.28

P.L.109-114 appropriated $2.9 billion for medical administration, a $1.8 billion

decrease in funding compared to FY2005, and 36.7% less than the FY2006 request.

Some proportion of this decrease could be attributed to the movement of $1.2 billion

in information technology development funding to a new information technology

systems account, under the departmental administration account (not shown in

Table 1). It should be noted here that the House version of the MIL-QUAL

appropriations bill, maintained information technology funding as part of the existing

medical administration account.

The MIL-CON-QUAL-VA Appropriations Act provided $3.3 billion for

medical facilities, a 12.3% decrease in appropriations when compared to FY2005,

and provided $412 million for medical and prosthetic research, a 2.4% increase in

funding over FY2005, and a 4.8% increase in funding over the FY2006 request

(Table 1). The conference committee directed VA to devote at least $15 million of

its research budget for Gulf War Illness research.29

P.L. 109-114, provides $607 million for construction major projects, of which

$532 million is for CARES-related projects. The conferees included bill language

that restricts VA’s ability to reduce the mission, services or infrastructure, including

land, of 18 facilities on the CARES list requiring further study, without prior

approval of the Appropriations Committees.30 Furthermore, the MIL-CON-QUALVA Appropriations Act appropriated $199 million for construction minor projects,

of which $155 million is for implementing CARES recommendations. P.L.109-114

also appropriated $85.0 million for grants for construction of state extended care

facilities. This is $60.0 million above the House recommended amount and $19.0

million less than the Senate recommended amount. It should be noted that these

amounts are not included in the total VHA budget because construction major,

construction minor, and grants for construction of state extended care facilities

accounts are funded through separate construction accounts.

The conferees for the MIL-CON-QUAL-VA Appropriations Act included

language that requires the VA to submit quarterly reports on the financial status and

service level status of VHA. The report would contain, among other things, both

planned and actual expenditure rates, unobligated balances, potential financial

shortfalls, the time required for new patients to get their first appointment, the time

required for established patients to get their next appointment, and the number of

unique veterans and patients being served.31

Ibid.p.39.

Ibid. p.14.

Ibid. p.47.

Ibid.p.50.

CRS-13

Gulf Coast Hurricanes and Avian Flu Pandemic Preparation

On September 2, 2005, the Emergency Supplemental Appropriations Act to

Meet Immediate Needs Arising From the Consequences of Hurricane Katrina, 2005

(P.L.109-61) was signed into law. It provided $10.5 billion in emergency

supplemental funds for hurricane-related disaster relief. On September 8, 2005, a

Second Emergency Supplemental Appropriations Act to Meet Immediate Needs

Arising From the Consequences of Hurricane Katrina, 2005 (P.L.109-62) was signed

into law, providing an $51.8 billion in emergency supplemental funds for

hurricane-related disaster relief. On October 28, 2005, President Bush submitted a

reallocation request to Congress that would transfer to other agencies $17.1 billion

of the total $60 billion appropriated to the Federal Emergency Management Agency’s

(FEMA’s) Disaster Relief Fund (DRF) to respond to Hurricanes Katrina, Rita,

Wilma, and other disasters. Congress responded to the President’s proposed

reallocation by attaching the reallocation request to the conference version of the

FY2006 Defense Appropriations bill (H.R. 2863).

The President requested $1.4 billion, among other things, to replace the VA

medical center in New Orleans, Louisiana, and repair the medical center in Biloxi,

Mississippi, destroyed by Hurricane Katrina; replace pharmaceuticals, medical

supplies, and equipment for VA hospitals and clinics in the hurricane-affected areas;

cover costs to continue veterans’ benefits processing; and clean up and repair

damaged national cemeteries.32 The President requested that of this amount, $198.3

million be allocated for medical services; $24.9 million for general operating

expenses; $200,000 to clean up and repair national cemeteries; $1.2 billion for the

construction major projects account to replace the medical center in New Orleans,

Louisiana, and to repair and add a bed tower to the medical center in Biloxi,

Mississippi; and $1.8 million for the construction minor projects account to repair

damaged roadways and other damage to national cemeteries as a result of Hurricane

Katrina.

Furthermore, on November, 1, 2005, the Administration requested $7.1 billion

for the Departments of Health and Human Services, Agriculture, Defense, Homeland

Security, the Interior, State, and Veterans Affairs.33 Of this amount, the President

requested $27.0 million for medical services to increase VA’s avian influenza

surveillance programs and to establish real-time surveillance data links with the

Centers for Disease Control and Prevention (CDC).

According to the

Administration’s request, this level of funding would also assist with planning

VA-wide preparations and responses to avian influenza involving other community

and federal agencies.

OMB, FY2006 Estimate No. 13, Reallocation package for Hurricane Katrina Relief and

Recovery (Various Agencies) Oct. 28, 2005 [http://www.whitehouse.gov/omb/budget/

amendments/reallocation_package_10_28_05.pdf].

OMB, FY2006 Estimate No. 15, Emergency Requests: Departments of Health and

Human Services; Agriculture; Defense; Homeland Security; the Interior; State; Veterans

Affairs; and International Assistance Programs (Avian and Pandemic Influenza

Preparedness), Nov 1, 2005 [http://www.whitehouse.gov/omb/budget/amendments/

supplemental_11_01_05.pdf].

CRS-14

On December 19, 2005, the House adopted the conference report (H.Rept. 109359) to accompany the FY2006 Department of Defense Appropriations bill (H.R.

2863). The Senate agreed to the conference report on December 21, 2005. The

conference agreement includes $225 million for medical services (Table 1); $24.9

million for general operating expenses; $200,000 to clean up and repair national

cemeteries; $368 million for construction major projects; and $1.8 million for the

construction minor projects accounts (these amounts are not shown in Table 1).

The Department of Defense Appropriations Act, 2006 (P.L. 109-148) was signed

into law on December 30, 2005.

Analysis of Funding for VHA

For FY2006, $23.0 billion is appropriated for medical services, a 2.6% increase

in funding over the FY2006 request, and a 9.2% increase in funding over the FY2005

enacted amount (Table 1). As stated previously, $2.9 billion is appropriated for

medical administration, a $1.8 billion decrease in funding compared to FY2005, and

36.7% less than the FY2006 request. Some proportion of this decrease could be

attributed to the movement of $1.2 billion in information technology development

funding to a new information technology systems account, under the departmental

administration account (not shown in Table 1). Furthermore, $3.3 billion is

appropriated for medical facilities, a 12.3% decrease in appropriations when

compared to FY2005, and $412 million is provided for medical and prosthetic

research, a 2.4% increase in funding over FY2005, and a 4.8% increase in funding

over the FY2006 request (Table 1). The total amount of funding for VHA for

FY2006 is $29.3 billion, a 3.5% decrease in funding compared to the President’s

budget request. The total amount of funding available for VHA for FY2006,

including collections, is $31.5 billion.

The total amount of funding for construction major projects is $975 million, a

$788 million decrease in funding from the total FY2006 request of $1.8 billion. As

stated in H.Rept. 109-359, the conferees of the FY2006 Department of Defense

Appropriations bill (H.R. 2863) provided funding for the construction of a new

hospital at Biloxi, Mississippi, to replace the facility destroyed at Gulfport,

Mississippi. Furthermore, the conferees did not include the full amount of funding

for a replacement hospital at New Orleans, Louisiana, because there is insufficient

information to determine the actual cost.34 The total amount of funding for

construction minor projects for FY2006 is $201 million, a $10.0 million decrease

compared to the FY2006 request and $28.0 million less than the FY2005 enacted

amount. It should be noted that these amounts are not included in the total VHA

budget because construction major and construction minor accounts are funded

through separate construction accounts.

U.S. Congress, Conference Committees, Department of Defense Appropriations Act ,

2006, conference report to accompany H.R. 2863, 109th Cong., 1st sess., H.Rept. 109-359,

p.513

CRS-15

Table 1. VHA Appropriations for FY2004, FY2005, and FY2006

($ in thousands)

Program

Medical services

Supplemental appropriations (P.L. 108-324)

Supplemental appropriations

FY2004

enacted

FY2005

request

FY2005

House

FY2005

Senate

FY2005

enacted

FY2006

request

$19,498,600a $19,316,995 $19,995,141 $20,995,141 $21,331,011 $21,322,141

$17,762,054

—

$19,498,600

—

$38,283

—

38,283

—

975,000

1,500,000

FY2006

House

FY2006

Senate

FY2006

enacted

—

1,977,000

1,225,000h

Emergency appropriations

—

1,977,000

Emergency appropriations - Gulf Coast

Hurricanes (P.L. 109-148)

—

198,265

—

198,265

Emergency appropriations - Avian Flu

Pandemic (P.L.109-148)

—

27,000

—

27,000

Subtotal medical services

17,762,054

1,013,283

20,473,600

20,998,600

20,855,278

22,197,406

20,995,141

23,308,011

22,772,406

Medical administration

4,970,500

—

4,705,000

4,667,360

4,517,874

4,134,874

2,858,442

—

1,940

—

1,940

—

Subtotal medical administration

4,970,500

1,940

4,705,000

4,669,300

4,517,874

4,134,874

2,858,442

Medical facilities

3,976,400

—

3,745,000

3,715,040

3,297,669

—

46,909

—

46,909

—

3,976,400

46,909

3,745,000

3,761,949

3,297,669

405,593

384,770

405,593

402,348

393,000

412,000

—

1,456,821

—

26,748,600

—

-270,000

—

Total VHA appropriations (without

collections)

26,844,547

28,195,502

28,308,370

28,854,193

29,688,875

30,405,949

28,820,684

31,332,943

29,340,517

Medical care cost collection (MCCF)j

1,554,772

2,002,000

1,985,984

2,170,000

Supplemental appropriations (P.L. 108-324)

Subtotal medical facilities

Medical and prosthetic research

Information technology

Medical care

rescission

Total: VHA (appropriations and

collections)

$28,399,319 $30,197,502 $31,310,370

$30,856,193 $31,674,859 $32,575,949 $30,990,684 $33,502,943 $31,510,517

Source: 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.

CRS-16

Note: 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) of

P.L. 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-theboard reductions as stipulated in Division B, Title III, Section 3801(c)(2) of P.L.109-148.

a. This amount includes $1.2 billion designated as an emergency requirement.

b. On June 30, 2005, the Administration requested an additional $975 million for medical services for FY2005.

c. On June 30, 2005, the House passed H.R. 3130.

d. On 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.

e. On 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.

f. On July 14, 2005, the Administration requested an additional $1.977 billion for medical services for FY2006.

g. On 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

appropriation.

h. On 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.

i. This amount includes funding for medical services, medical administration, and medical facilities.

j. Medical Care Cost Collection Fund (MCCF) receipts are restored to VHA as an indefinite budget authority equal to the revenue collected, estimated to be $1.985 billion in FY2005

and $2.17 billion in FY2006.

CRS-17

Key Budget Issues

In its FY2006 budget proposal the Administration is recommending a set of

legislative and regulatory proposals. The Administration asserts that these proposals

will refocus the veterans’ health care system to better meet the needs of high priority

core veterans — those with service-connected conditions, those with lower incomes,

and veterans with special care needs. Some of these proposals were proposed in

FY2004 and FY2005 as well, and were rejected by Congress.35

Changes in Cost-Sharing for Health Services

Assess an annual enrollment fee of $250 for all Priority 7 and 8

veterans;

Increase the veterans’ share of pharmaceutical copayments from $7

to $15 (for each 30-day prescription) for all enrolled veterans in

Priority Groups 7 and 8;

Eliminate copayments for hospice care; and

Authorize VA to pay for emergency care for enrolled veterans in

non-VA medical facilities.

Changes in Long-Term Care Services

Revise eligibility criteria for VA sponsored long-term care and

restrict per-diem payments to state veterans nursing homes;

Place a one year moratorium on grants for state extended care

facilities;

Exempt former POWs from long-term care copayments; and

Eliminate mandatory long-term care daily census requirements.

A detailed description of the above legislative proposals follows:

Legislative Proposals to Change

the Cost-Sharing Structure

Assess an Annual Enrollment Fee

The Administration proposes to establish an annual enrollment fee of $250

beginning October 1, 2005, for all Priority 7 and 8 veterans. Priority Group 7

veterans have incomes above $25,843 for a single veteran and below the Department

of Housing and Urban Development (HUD) geographic means test level.36 Priority

See CRS Report RL32548, Veterans’ Medical Care Appropriations and Funding Process,

by (name redacted).

Geographic means test figures are available at [http://www.va.gov/healtheligibility/

(continued...)

CRS-18

Group 8 veterans are those with incomes above $25,843 for a single veteran and

above the HUD geographic means test. The HUD geographic means test is

established at a local level such as county or city. For instance, a veteran with no

dependents residing in Cleveland County, Arkansas, whose annual income in 2004

was $26,149 will be placed in Priority Group 7, since the veteran’s annual income

is above VA’s means test threshold and below the geographic means test threshold

for FY2004 of $26,150. Similarly, a veteran with no dependents living in Trenton,

New Jersey, whose annual income in 2004 was $40,249 will be placed in Priority

Group 7, since the veteran’s annual income is above VA’s means test threshold and

below the geographic means test threshold for FY2004 of $40,250. It should noted

that there is wide variation in annual incomes of veterans placed in Priority Groups

7 and 8.

In its FY2004 and FY2005 budget submissions, the President requested

authority from Congress to levy an annual enrollment fee on all Priority 7 and

Priority 8 veterans. However, Congress did not approve imposing such a fee.

The MIL-QUAL appropriations bill passed by the House does not contain any

provision that would impose an enrollment fee. Likewise, the MIL-CON

appropriations bill passed by the Senate does not contain any provision that would

impose an enrollment fee. The MIL-QUAL-VA Appropriations Act (P.L. 109-114)

does not include any provisions that would impose an enrollment fee on veterans.

Although the House Appropriations Committee did not approve imposing an

annual enrollment fee, the House Veterans Affairs Committee (majority members)

in its FY2006 views and estimates letter to the House Budget Committee

recommended a $230 enrollment fee for Priority Group 7 veterans, and a four tired

enrollment fee for Priority Group 8 veterans based on their income above the HUD

geographic means test. According to the Committee the fees would be: Tier 1 —

$230; Tier 2 — $250; Tier 3 — $350; Tier 4 — $500. The Committee’s views and

estimates letter further states that these enrollment fees would apply to both veterans

who are currently enrolled and new enrollees.

Similarly, the majority members of the Senate Veterans Affairs Committee in

its FY2006 views and estimates letter to the Senate Budget Committee did agree to

approve a $250 a year enrollment fee for higher income veterans who have no

service-connected injuries. It should be noted that at this time both the House and

Senate Veterans Affairs Committees have not introduced any measures that will give

VA the authority to implement this proposal.

(...continued)

costs/docs/GMT_Income_Thresholds_2004.pdf]. Also note that when determining if the

veterans should be placed in Priority Group 7 or Priority Group 8 based on income, the

veteran’s income from the previous year is compared with the appropriate geographic means

test threshold for the previous fiscal year. For example, annual income for 2004 is

compared to the geographic means test threshold for FY2004.

CRS-19

Increase Pharmacy Copayments

The Administration proposes to increase the pharmacy copayments from $7 to

$15 for all enrolled Priority Group 7 and Priority Group 8 veterans whenever they

obtain medication from VA on an outpatient basis for the treatment of a nonserviceconnected disability. At present, veterans in Priority Groups 2-8 pay $7 for a 30-day

supply of medication including over-the-counter medications.37 The Administration

put forward this proposal in its FY2004 and FY2005 budget requests as well, but did

not receive any approval from Congress.

Similar to the enrollment fee proposal, The MIL-QUAL appropriations bill

passed by the House does not contain any provision that would authorize an increase

in pharmacy copayments. Likewise, the MIL-CON appropriations bill passed by the

Senate does not contain any provision that would that would authorize an increase

in pharmacy copayments. The MIL-QUAL-VA Appropriations Act signed into law

by the President does not include any provisions that would authorize an increase in

pharmacy copayments from $7 to $15.

The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) authorized VA

to charge most veterans $2 for each 30-day supply of medication furnished on a

outpatient basis for treatment of a nonservice-connected condition. The Veterans

Millennium Health Care and Benefits Act of 1999 (P.L. 106-117) authorized VA to

increase the medication copayment amount and to establish annual caps on the

medication copayment amount.38 An annual cap was established to eliminate

financial hardship for veterans enrolled in Priority Groups 2-6. When veterans reach

the annual cap, they continue to receive medications without making a copayment.

For calendar year 2005, the cap is $840. There is currently no cap for veterans in

Priority Groups 7 and 8 (see Appendix 2).

On November 15, 2005, 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 a outpatient basis for treatment of a nonservice-connected

Veterans receiving a pension for a nonservice-connected disability from VA, veterans

with incomes below $10,162 (if no dependents), and $13,309 (with one dependent plus

$1,734 for each additional dependent ), veterans receiving care for conditions such as Agent

Orange, Military Sexual Trauma and combat veterans within two years of discharge, and

veterans who are former POW’s are exempt from paying copayments.

This law allowed 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 VA increased

the copayment amount from $2 to $7. The medication co-payment charge for each

subsequent calendar year after 2002 is established by using the prescription drug component

of the Medical Consumer Price Index. When an increase occurs, the co-payment will

increase in whole dollar amounts. The amount of the annual cap increases $120 for each $1

increase in the co-payment amount.

CRS-20

condition, and that the annual cap for veterans enrolled in Priority Groups 2-6 will

be $960.39 There would be no cap for veterans in Priority Groups 7 and 8.

Impact of the Annual Enrollment Fee and Increase in Pharmacy

Copayments. According to actuarial projections done by VA, the $250 annual

enrollment fee and the increase in prescription drug copayments would reduce the

number of unique veteran patients in FY2006 by approximately 213,000, and 1.1

million veteran enrollees. The enrollment fees and increased copayments would

generate about $454 million in revenue and save VA an additional $202 million due

to reduced demand.

The conferees for the MIL-QUAL-VA Appropriations Act (P.L.109-114)

included report language that directs VA not to include policy proposals such as

increased pharmacy copayments and annual enrollment fees in future budget

requests, unless the proposals are enacted and savings are realized. The conference

report further states that “for the last four years, there has been a proposal for an

enrollment fee and an increase in pharmacy co-payments included in the budget with

unrealistic savings. Every year the Congress has had to find resources to make up for

savings projections which do not materialize.”40

Exempt Copayments for Hospice Care

The Administration is proposing to exempt hospice care provided in all settings

from inpatient and outpatient copayments. Under current law, veterans receiving

hospice care may be subject to copayment obligations depending upon the type of

VA facility or setting in which they receive care. Veterans are subject to inpatient

copayments if they seek inpatient hospice care at facilities without nursing home

beds, or if the hospice care must be provided in an acute care setting as a result of

clinical complexity. Moreover, veterans choosing to remain at home for their

hospice care are subject to outpatient primary care copayments.

The Veterans Health Programs Improvement Act of 2004 (P.L. 108-422),

among other things, exempted veterans receiving hospice care at a nursing home

from extended care copayments.

The Veterans Health Care Act of 2005 (S. 1182), as introduced on June 7, 2005,

contained a provision that would have authorized VA to exempt from copayment

obligations veterans receiving hospice care from any VA facility or setting.

However, S. 1182, passed by the Senate on December 21, 2005, does not include

this provision. This bill is awaiting House action.

VHA Directive 2005-052, Implementation of Medication Co-payment Changes, Nov. 15,

2005.

U.S. Congress, Conference Committees, Military Quality of Life and Veterans Affairs

Appropriations Act, 2006, conference report to accompany H.R. 2528, 109th Cong., 1st

sess., H.Rept. 109-305, p.42.

CRS-21

Authorize VA to Pay for Emergency Care for Insured Veterans

The Administration is proposing to reimburse out-of-pocket expenses for

emergency care treatment provided to certain insured veterans in non-VA facilities.

Under current law, VA is authorized to reimburse all veterans for emergency

treatment furnished in non-VA facilities for nonservice-connected conditions if they

meet the following criteria: (1) they have enrolled in VA’s health care system; (2)

they have received care from VA within the 24-month period preceding the provision

of such emergency treatment; and (3) they are financially liable to the provider for

the emergency treatment. Veterans who have health insurance coverage for

emergency care, or are entitled to other federal benefits care (i.e., under Medicare or

Medicaid), or have other contractual or legal recourse are not eligible for

reimbursement. 41 Currently, VA does not reimburse the veteran’s out-of-pocket

expenses associated with nonservice-connected care.42

The Administration’s proposal would give VA the authority to pay for insured

veteran patients’ out-of-pocket expenses for emergency care services if emergency

care is obtained outside of the VA health care system for a nonservice-connected

condition. VA would be a secondary payer to private insurance or Medicare for

emergency care services. VA would cover the out-of-pocket expenses, that is the

amount of the co-payment the veteran would have been required to pay if the veteran

had received the care from VA for a nonservice-connected condition. A similar

proposal was included in the FY2005 budget request as well, however, there was no

legislative action on this proposal.

Section 17 of the Veterans Health Care Act of 2005 (S. 1182) if enacted, would

authorize VA to reimburse an eligible veteran for expenses for which the veteran

remains personally liable had the veteran received emergency treatment in a non-VA

facility. This bill was reported out of the Senate Veterans’ Affairs Committee on

September 15, 2005, with an amendment in the nature of a substitute and passed by

the Senate on December 21, 2005. This bill is awaiting House action.

Legislative Proposals to Change

Long-Term Care Services

Revise Eligibility Criteria for

Long-Term Care and Per-Diem Payments

VA’s long-term care program includes a continuum of services for the delivery

of care to veterans needing assistance due to chronic illness or physical or mental

disability. Long-term care services are provided in a variety of settings, including

Veterans Millennium Health Care and Benefits Act (P.L. 106-117).

VA fully reimburses veterans for emergency treatment obtained in non-VA medical

facilities for service-connected disabilities (38 U.S.C. § 1728).

CRS-22

institutional care in nursing homes, or home and community-based noninstitutional

care, and respite care services that temporarily relieves a caregiver from the burden

of caring for a chronically ill and disabled veteran in the home.

Nursing home care is provided through VA-operated nursing homes, VA

contracted community nursing homes, and state veterans nursing homes owned and

operated by individual states. VA pays a portion of the daily cost of care of veterans

residing in these homes, paying a per-diem ($59.36 in FY2005) for each eligible

veteran. VA does not directly place patients in state veterans homes as it does in

contracted community nursing homes; veterans must apply to the homes for

admission, and eligibility and admission requirements vary by each state.

In general, under the Veterans Millennium Health Care and Benefits Act

(P.L.106-117) VA provides nursing home care to: any veteran with a serviceconnected disability rated 70% or greater; any veteran requiring nursing home care

because of a condition related to their military service who does not have a serviceconnected disability rating of 70% or greater; and veterans who were admitted to VA

nursing homes on or before enactment of P.L 106-117. VA also provides nursing

home care to veterans with 60% service-connected disability ratings who are

classified as unemployable or catastrophically disabled.43 For all other veterans

enrolled in VA’s health care system, VA provides nursing home care in VA nursing

homes or contract community nursing homes on a discretionary basis depending on

available resources.

In its FY2006 budget proposal the Administration proposes to revise VHA’s

eligibility criteria for long-term care services provided in VA, community, and state

nursing homes. Under the President’s proposal state veterans nursing homes would

receive per diem payments for Priority Groups 1-3 veterans and Priority Group 4

veterans who have catastrophic disabilities and who need short-term care (less than

90 days), or hospice or respite care. For Priority Group 4 veterans who are not

catastrophically disabled, and for Priority Groups 5-8 veterans, state veterans nursing

homes would be reimbursed only for short- term care subsequent to a hospital stay.

VA asserts that this proposal would save the department $294 million in FY2006.

The number of veterans in state nursing homes on whose behalf VA pays per-diem

payments would decrease from 17,328 in FY2004 to 7,217 in FY2006.

The House Committee on Appropriations rejected the Administration’s proposal

to restrict per diem payments to state veterans nursing homes. The committee report

states that “VA should with the National Association of State Veterans Homes and

other stakeholders develop and implement solutions that will give veterans the best

Veterans are considered to be catastrophically disabled if they have a permanent severely

disabling injury, disorder, or disease that compromises the ability to carry out the activities

of daily living (ADL) such as eating, dressing, bathing, to such a degree that the individual

requires personal or mechanical assistance to leave home or bed or requires constant

supervision to avoid physical harm to self or others.

CRS-23

options for quality long-term care.”44 According to the committee report, the amount

of funding provided under the medical services account is sufficient for providing

long-term care services in state veterans nursing homes without revising current

eligibility criteria for long-term care services.

Similarly, the Senate Committee on Appropriations did not accept the

Administrations proposals to revise the eligibility requirements for receiving per

diem payments for care in state veterans nursing homes. According to S.Rept. 109105, “by adopting any proposal that restricts per diem payments, notably by

instituting rules that would make only priority level one, two, three, and

catastrophically disabled level four veterans eligible for per diem payments, the VA

could be placing state veterans homes in an untenable financial position.”45

The conferees rejected this proposal to revise eligibility criteria for long-term

care provided in veterans nursing homes. The conference report further states that

sufficient resources have been provided “to maintain a policy of providing long-term

care to all veterans, utilizing VA-owned facilities, community nursing homes, state

nursing homes, and other noninstitutional venues.”46

Place a One-Year Moratorium on Grants

for State Extended Care Facilities

VA provides grants to states to acquire or construct extended care facilities, and

to expand, remodel, or alter existing buildings. A grant may not exceed 65% of the

total cost of the project.

In its FY2006 budget proposal, the Administration is proposing a one-year

moratorium on grants to state extended care facilities. During this one-year period

VA intends to complete a review of its long-term care infrastructure, comparing

projected demand against capacity. As a result of this proposed study, VA has not

requested any funding for FY2006 for grants for state extended care facilities. This

is a decrease of $104 million from FY2005.

The House Committee on Appropriations recommended $25 million for the

grant program. According to the committee report language, funds will be used for

safety improvements in existing state home facilities. Furthermore, the committee

directs VA to undertake an extensive analysis of veterans’ long-term care needs.

U.S. Congress, House Committee on Appropriations, Military Quality of Life and

Veterans Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R.

2528, 109th Congress, 1st session, H.Rept. 109-95, p. 52.

U.S. Congress, Senate Committee on Appropriations, Military Construction and Veterans

Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R. 2528,

109th Congress, 1st session, H.Rept. 109-105, p. 55.

U.S. Congress, Conference Committees, Military Quality of Life and Veterans Affairs

Appropriations Act, 2006, conference report to accompany H.R. 2528, 109th Cong., 1st

sess., H.Rept. 109-305, p.42.

CRS-24

The Senate Appropriations Committee recommended $104 million for the grant

program. According to the committee report:

The Committee was disappointed that VA did not request any funding for this

program, nor did it provide any explanation for the action. The Committee

believes the VA decision to “suspend” this program was done solely to reduce

the budget request and has no substantive merit. Therefore, the Committee

recommendation includes a funding level that is equal to the fiscal year 2005

enacted level. To do any less could potentially jeopardize projects currently

awaiting funding as well as the welfare of deserving veterans47

P.L. 109-114 appropriated $85 million for the grant program. The conferees for

the MIL-QUAL-VA Appropriations Act requested VA to undertake a “rigorous and

extensive” analysis of the long-term care needs of veterans and report to the

Committees of Appropriations by March 31, 2006.

Exempt Former Prisoners of War (POWs)

from Long-Term Care Copayments

The Administration is proposing to exempt former POWs from paying

copayments for long-term care services. The Veterans Health Care, Capital Asset,

and Business Improvement Act of 2003 (P.L. 108-170) provided VA with the

authority to exempt former POWs from medication copayments. At present, former

POWs have no copayment obligations for hospital and medical services, except for

long-term care services. This proposal would effectively end any remaining

copayment obligations on part of a former POW. It should be noted that the

Administration put forth a similar proposal in its FY2005 budget request as well,

however, there was no legislative action on this proposal.

The Veterans Health Care Act of 2005 (S. 1182) was introduced on June 7,

2005, by Senator Craig, Chairman of the Committee on Veterans Affairs. As

introduced in the Senate, the bill contained a provision that would have eliminated

copayment obligations on part of former POWs for long-term care services. The

Committee held a hearing on this measure on June 9, 2005. However, S. 1182 , as

passed by the Senate, does not include this provision.

Eliminate Mandatory Long-Term Care

Daily Census Requirements

The Administration is requesting Congress to repeal the mandatory staffing and

level of extended care service requirements under current law. The Veterans

Millennium Health Care and Benefits Act of 1999 (P.L. 106-117) required VA to

maintain its inpatient long-term care bed capacity at the 1998 level of 13,391. The

law specifically states:

U.S. Congress, Senate Committee on Appropriations, Military Construction and Veterans

Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R. 2528,

109th Cong., 1st sess., S.Rept. 109-105, p. 65.

CRS-25

The Secretary shall ensure that the staffing and level of extended care services

provided by the Secretary nationally in facilities of the Department during any

fiscal year is not less than the staffing and level of such services provided

nationally in facilities of the Department during fiscal year 1998.48

VA asserts that it seeks to provide long-term care services in the least restrictive

setting that is compatible with the veterans medical condition and personal

circumstances. VA believes that by repealing the mandatory staffing requirements

and requirements concerning the number of long-term care beds, it will be able to

provide veterans with home and community- based services (HCBS), while reserving

nursing home care for situations in which the veteran can no longer be cared for in

a home and community-based setting. According to VA, this proposal would reduce

the average daily census of veterans residing in VA nursing homes from 12,354 at

the end of FY2004 to 9,795 in FY2006 and save $202 million in FY2006. VA is

projecting an increase in both work load and funding for HCBS programs. The

number of veterans in HCBS programs is projected to increase from 25,523 in

FY2004 to 35,540 in FY2006. During this same period funding is projected to

increase from $287 million to $400 million. VA believes that projected increase in

HCBS programs will serve to offset some of the reductions in nursing home care.49

The Veterans Health Care Act of 2005 (S. 1182), as introduced in the Senate,

contained a provision that would have repealed the mandatory staffing and level of

extended care requirements under current law. However, S. 1182, as passed by the

Senate, does not include this provision.

P.L. 106-117, 113 STAT. 1548.

U.S. Department of Veterans Affairs, FY2006 Budget Submissions, Medical Programs,

vol. 2, pp. 8-18.

CRS-26

Appendix 1. 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 Heart

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 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.

Note: 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.

CRS-27

Appendix 2. Veterans’ Payments

for Health Care Services

Copayments

Insurance billing

Inpatient

Outpatient

Medicationa

Priority Group 1

Yes, but only if care

was for nonserviceconnected condition

Priority Groups

2, 3,b 4c

Yes, but only for

veterans with

less than 50%

service

connected

disability and

medication is for

nonserviceconnected

condition

Yes, but only if care

was for nonserviceconnected condition

Priority Group 5

Yes

Yes, but only if care

was for nonserviceconnected condition

Priority Group 6

(WWI, and 0%

service-connected

compensable)

Yes

Yes, but only if care

was for nonserviceconnected condition

Priority Group 6

(Veterans receiving

care for exposure or

experienced)

Nod

Yes, but only if care

was for nonserviceconnected condition

Priority Group 7e

Yes

Yes, but only if care

was for nonserviceconnected condition

Priority Group 8f

Yes

Yes, but only if care

was for nonserviceconnected condition

Source: President’s Task Force to Improve Health Care Delivery for Our Nation’s Veterans

Note: Veterans receiving a pension for a nonservice-connected disability from VA, veterans with incomes

below $10,162 (if no dependents), and $13,309 (with one dependent plus $1,734 for each additional

dependent ), veterans receiving care for conditions such as Agent Orange, Military Sexual Trauma and

combat veterans within two years of discharge, and veterans who are former POWs are exempt from paying

outpatient prescription copayments for nonservice-connected conditions.

a. An annual medication copayment cap has been established for veterans enrolled in priority groups 2-6.

Medication will continue to be dispensed after copayment cap is met. An annual copayment cap has

not been established for veterans enrolled in Priority Groups 7 or 8.

b. 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.

c. Priority Group 7 veterans who are determined to be catastrophically disabled and who are placed in

Priority Group 4 for treatment are still subject to the copayment requirements as a Priority Group 7

veteran.

CRS-28

d. Priority Group 6 — health insurance and all applicable copayments will be billed when care is for

conditions not related to the veteran’s experience or exposure. Veterans in this priority group could

be subject to full medical care copayments or reduced inpatient copayments under means-test criteria

for nonservice-connected conditions. Combat veterans receiving care for a potential service related

condition within two years of discharge from the military are in Priority Group 6.

e. Priority Group 7 veterans — For inpatient copayments only, veterans enrolled in this priority group are

responsible for 20% of the inpatient copayment (in traditional insurance this is known as a deductible)

and 20% of the inpatient per diem copayment. The means-tested copayment reduction does not apply

to outpatient and medication copayments and veterans will be assessed the full applicable copayment

charges for nonservice-connected care.

f. Priority Group 8 veterans — For inpatient copayments only, veterans enrolled in this priority group are

responsible for the full inpatient copayment (in traditional insurance this is known as a deductible) and

the inpatient per diem copayment. Veterans in this priority group are also responsible for the full

outpatient and medication copayments for nonservice-connected care. There is no means-tested

copayment reduction.

CRS-29

Appendix 3. VHA’s New Account Structure

Medical Services. This account provides funds for treatment of veterans and

eligible beneficiaries in VA medical centers, nursing homes, outpatient clinic facilities,

and contract hospitals. Hospital and out patient care is also provided by the private sector

for certain dependents and survivors of veterans under the Civilian Health and Medical

Program of VA (CHAMPVA). Funds are also used to train medical residents, interns, and

other professional, paramedical and administrative personnel in health science fields to

support VA’s medical programs. Overhead costs associated with medical and prosthetic

research are also funded by this account.

Medical Administration. This account provides funds for the management and

administration of VA’s health care system. Funds are used for the costs associated with

the operation of VA medical centers, other facilities, VHA headquarters, costs of Veterans

Integrated Service Network (VISN) offices, billing and coding activities, and

procurement.

Medical Facilities. This account provides funds for the operation and maintenance

of VHA’s infrastructure. Funds are used for costs associated with utilities, engineering,

capital planning, leases, laundry, food services, groundskeeping, garbage disposal, facility

repair, and selling and buying of property.

Medical and Prosthetic Research. This account provides funds for medical,

rehabilitative, and health services research. The medical and prosthetic research program

is an intermural program. In addition to funds from this appropriation, reimbursements

from the Department of Defense (DOD), grants from the National Institutes of Health

(NIH), and private sources supports VA researches. Medical research supports basic and

clinical studies that advances knowledge so that efficient, and rational interventions can

be made to prevent, care or alleviate disease. The prosthetic research program is involved

in the development of prosthetic, orthopedic and sensory aids to improve the lives of

disabled veterans. The health services research program focuses on improving the

outcome effectiveness and cost efficiency of health care delivery for the veterans

population. Overhead costs associated with medical and prosthetic research are also

funded by the medical services account.

Medical Care Collections Fund (MCCF). VA deposits copayments collected

from veterans obligated to make such payments for either medical services or inpatient

pharmacy benefits for outpatient medication, and third-party insurance payments from

service-connected veterans for nonservice-connected conditions into MCCF.

Previously copayments, third-party insurance payments, and fees for services other

than medical services or inpatient pharmacy benefits were deposited in several medical

collections accounts. In FY2004, the Administration’s budget requested consolidating

several medical collections accounts into 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

CRS-30

Parking Revolving Fund (former name) should be deposited in MCCF.50 The

Consolidated Appropriations Act of 2005, (P.L. 108-447, H.Rept. 108-792) provided VA

with permanent authority to deposit funds from these accounts into MCCF. The funds

deposited in 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.

For a detailed description of these former accounts, see CRS Report RL32548, Veterans’

Medical Care Appropriations and Funding Process, by (name redacted).

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