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Hearing Of The House Veterans' Affairs Committee - Funding The VA Of The Future

Chaired By: Rep. Bob Filner (D-CA)

Witnesses Panel I: Joseph A. Violante, National Legislative Director, Disabled American Veterans, Partnership For Veterans Health Care Budget Reform; Steve Robertson, Director, National Legislative Commission, American Legion, On Behalf Of Partnership For Veterans Health Care Budget Reform; Carl Blake, National Legislative Director, Paralyzed Veterans Of America On Behalf Of Partnership For Veterans Health Care Budget Reform;

Panel II: Katherine M. Harris Ph.D., Study Director, Review And Evaluation Of The Va Enrollee Projection Model, Rand Corporation; Sidath Viranga Panangala, Analyst In Veterans Policy, Congressional Research Service, Library Of Congress; Jessica Banthin, Ph.D., Director Of Modeling And Simulation, Center For Financing, Access And Cost Trends, Agency For Healthcare Research And Quality, U.S. Department Of Health And Human Services; Randall B. Williamson, Director, Health Care, U.S. Government Accountability Office; Susan J. Irving, Director , Federal Budget Analysis, Strategic Issues, U.S. Government Accountability Office;

Panel III: The Honorable Erik K. Shinseki, Secretary, U.S. Department Of Veterans Affairs; Patricia Vandenberg Mha, Bsn, Assistant Deputy Undersecretary For Health For Policy And Planning, Veterans Health Administration, U.S. Department Of Veterans Affairs

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REP. FILNER: (Sounds gavel.) Good morning. This session of the House Veterans' Affairs Committee is called to order.

We thank all of you for being here and I'd just ask unanimous consent that all members may have five legislative days in which to revise their remarks. Hearing no objection, so ordered.

We're going to try to move a little faster because we have votes in about an hour or so, so we hope to get people in. And let me just say that this is obviously a very important hearing. The power of the purse is I think the most important power Congress has, and our budget, of course, must reflect our goals and our responsibilities.

Veterans play at a high priority in our thinking and our budget, but as virtually all the veterans' groups will tell us that having a budget is fine, but if it's not a timely budget, it throws everything into turmoil -- nobody can plan, nobody can hire, nobody knows what to do. In fact, over the last 20 years I think the VA budget has been enacted before the start of the fiscal year only four times.

Advance funding is the mechanism by which we hope to get control over that. Senator Akaka and I have introduced legislation to accomplish it and many members of this committee support the House bill H.R. 1016.

So we want to hear today from interested parties about how we make this process work, any problems with advance funding, how we may deal with those, and we look forward to trying to get that done, at least through this committee, as soon as we can.

I would yield to Mr. Buyer for an opening statement.

REP. STEVE BUYER (R-IN): Before I go to an opening statement, I've a question for the chairman.

It has been a custom of this committee and most committees of the Congress to have members of the president's Cabinet as the first witness to testify. Recognizing that the secretary is a representative of the president -- he is in fact the president's agent at this hearing here today -- and given that each branch is a co-equal in our respect and mutual respect between the legislative, the judiciary and the executive branch, I believe that the secretary should be accorded the respect that he is due.

The question for the chairman is, is today's order of witnesses, which places the secretary on a third panel, a considered exception to the usual practice?

REP. FILNER: Would you have Mr. Buyer's light on, because this is part of his opening statement, please? Because he seems to be representing his party well in obstructing things as usual.

But the chairman sets the agenda, and I'll be happy to answer it when your opening statement is through.

REP. BUYER: I'd like to make a motion, given that I have the time. I move that the current panel number three be made panel number one and move panel number one to panel number two and move current panel number two to panel number three. This is my motion.

REP. FILNER: Any second? Motion dies for lack of a second.

REP. BUYER: I have a motion to make -- I make a motion --

REP. FILNER: The motion is out of order. The chairman sets the agenda for the meeting. And Mr. Buyer, I have watched you -- I have watched you --

REP. BUYER: Wait a minute -- I control the time.

REP. FILNER: You don't control anything.

REP. BUYER: I control the time.

REP. FILNER: I have watched you for four years as chairman --

REP. BUYER: I ask for regular order. I ask for regular order.

REP. FILNER: I have watched -- I have watched you for four years as chairman --

REP. BUYER: I ask for regular order. This is my time. This is my time, Mr. Chairman.

REP. FILNER: And your motion is out of order.

REP. BUYER: Then I have a second motion. I make a motion to move the current panel number three to panel number one. I move a current panel number one to panel number two and move the current panel number two to panel number three.

REP. FILNER: The motion is out of order.

REP. BUYER: It is not out of order.

REP. FILNER: The motion is out of order. Do you want your time or not?

REP. BUYER: Would the chairman cite the rule? I'd like a parliamentary inquiry to cite the rule as to how this motion would be out of order?

REP. FILNER: Because the chairman sets the agenda. It's not subject to your --

REP. BUYER: But the chairman cannot make up the rules. Will the chairman -- will counsel please advise? Parliamentary inquiry -- will the counsel please advise as to why this would be out of order?

REP. FILNER: You know, Mr. Buyer, let me --

REP. BUYER: No, no, no, this is a parliamentary inquiry.

REP. FILNER: Wait. Mr. Buyer, let me say something about your issues here, which I take -- you were chairman for four years. You ran the committee and the agenda the way you should. We thought it was wrong, but you did it. I have watched for 16 years in this committee, both under Republican and --

REP. BUYER: Is this on my time?

REP. FILNER: Both under Republican --

REP. BUYER: I reclaim my time. I reclaim my time. You can say what you want on your time.

REP. FILNER: Your time has expired.

REP. BUYER: I have two -- wait a second, to my colleagues here, this is ridiculous.

REP. FILNER: Mr. Buyer --

REP. BUYER: I have two minutes and 42 seconds on my time.

REP. FILNER: Yes. Mr. Buyer -- Mr. Buyer.

REP. BUYER: No, this is my time. (Inaudible) -- is my time.

REP. FILNER: You have a -- okay, you may finish your --

REP. BUYER: Here's what's challenging -- here's what's challenging, to those who are listening: I equally have listened to you belittle two prior secretaries and now you are demeaning this president's secretary by what you're doing here today and I am very bothered by it.

I asked and made sure that Mr. Kingston would talk to Malcolm to make sure that this type of embarrassment would not occur, and you know what? My friends out here, representatives of the VSOs, they pride themselves equally with regard to values and virtues and respect, and this town works when you have mutual respect.

Now, General Shinseki -- now Secretary Shinseki -- he's not going to get involved in this. Why? Because he's a gentleman. And so when you say, "Well, Mr. Secretary, I want you to be on the third panel," you know what? He's going to say, "I'll be wherever I think I need to be."

But what is important, I believe, for us is to make sure that we treat secretaries with the respect for which they are accorded, and I was hopeful that that in fact would have happened here today.

And so I'm greatly disappointed -- greatly disappointed but not surprised that once again you would attempt to manipulate the rules and make things up as you go. That's really unfortunate.

What those of us here on the committee have done is we've worked very hard so that we work between each other and we have respect with each other. But I am stunned that you would treat the Secretary Shinseki in a manner. And you know what? The secretary has an excellent working relationship. He stepped off like he should and he built rapport with the veterans' services organizations.

So you set the stage here today to sort of imply that here's a secretary, we're going to put him on the third panel. He's going to sit there, he's going to listen to the first two panels -- what? The implication or inference is that the secretary doesn't listen to the veterans service organizations? That is false, because he has already met and meets regularly with them.

So you don't set that stage. The secretary is doing exactly what the secretary should be doing. So does form and procedure and rules matter? Absolutely. And that's why I asked very politely here that the secretary be placed on the first panel.

You're absolutely right, you can run things the way you want to run things. I just believe that you're setting the wrong perception and implication out there. This is a secretary that listens, he's met with every member of this committee, he moves out smartly, he wants to do the right thing by our soldiers and dependents and the disabled and the families, but you're setting the wrong tone and that's the reason I was politely asking for this replacement.

REP. FILNER: Thank you, Mr. Buyer.

The first panel consists of representatives of various veterans service organizations and representing the Partnership for Veterans Health Care Budget Reform.

Joe Violante is the national legislative director of the Disabled American Veterans. Steve Robertson is the director of the National Legislative Commission of the American Legion. Carl Blake is the national legislative director of the Paralyzed Veterans of America.

As you know, you'll be recognized for five minutes each. Your written statements will be made part of the record and we look forward to your testimony. We thank you for getting this coalition together and making sure that the Hill and the nation understand what's at stake here.

Mr. Violante?

MR. VIOLANTE: Thank you, Mr. Chairman and members of the committee.

Thank you for holding this hearing today and for inviting the Partnership for Veterans Health Care Budget Reform to testify.

The partnership includes the American Legion, AMVETS, Blinded Veterans Association, Disabled American Veterans, Jewish War Veterans, Military Order of the Purple Heart, Paralyzed Veterans of America, Veterans of Foreign Wars and Vietnam Veterans of America.

Mr. Chairman, it has been over 18 months since I testified before this committee at a hearing on this same subject -- how to provide sufficient, timely and predictable funding for veterans' health care programs. Then, as had been our position for many years, the partnership focused on mandatory funding.

However, at that hearing I told the committee this: If the committee chooses a different method for effecting this change, we will examine that proposal to determine whether it meets our three specific standards for reform: sufficiency, predictability and timelines of funding for VA health care. If that alternative fully meets those standards, our organizations will enthusiastically support it.

Well, you did, we have, it does and we do. That is, you did introduce new legislation, H.R. 1016, the Veterans Health Care Budget Reform and Transparency Act, that supports advance appropriations.

The partnership was honored to work with you and Chairman Akaka in developing that proposal. The new legislation does meet our goals, and the partnership does enthusiastically support it.

Mr. Chairman, we applaud Congress for the significant funding increases that have occurred in recent years and the president's 2010 budget request. However, for too long the VA health care system has had to struggle with budgets that were too little and too late.

In 2001, VA health care funding began to fall significantly behind the demand for services, straining VA's ability to provide treatment and leaving 250,000 veterans waiting six months or longer for doctor's appointments. In 2002, VA placed a moratorium on marketing and outreach activities. In 2003, then-Secretary Principi cut off enrollment of new Priority Group 8 veterans.

In 2004, Secretary Principi told this committee that VA's FY 2005 budget request was cut $1.2 billion by OMB. In 2005, Secretary Nicholson admitted that VA's budget request for FY 2005 and 2006 were insufficient.

And while we appreciate Congress completing the VA's appropriations on time last year, that was only the third time in two decades. Unfortunately, VA officials have become accustomed to continuing resolutions and emergency supplemental appropriations. This has created a feast-or-famine mentality wherein VA managers hoard money in the beginning of the year and spend money unnecessarily at the end. No private sector business, especially a health care system, would operate effectively without knowing what its budget will be until months after the start of the fiscal year, and neither can VA. To resolve these problems, the partnership believes that the proposal most likely to lead to sufficient, timely and predictable funding is H.R. 1016.

We thank you, Mr. Chairman, for working with the partnership and Chairman Akaka in developing this legislation and we are pleased that these bills have significant bipartisan support -- 97 co-sponsors in the House and 41 in the Senate.

In addition to the partnership, this legislation is endorsed by the Independent Budget, the Military Coalition, and the American Federation for Government Employees. Advanced appropriations have also been endorsed by a coalition of former VA senior officials, including former Secretary Principi.

I have a statement from this coalition and ask unanimous consent that it be made part of the record.

REP. FILNER: So ordered.

MR. VIOLANTE: We recently met with President Obama, who told us in a private meeting and then reiterated before the cameras that he fully intends to keep his campaign promise on advanced appropriations.

President Obama said the following, quote: "The care that our veterans receive should never be hindered by budget delays. I've shared this concern with Secretary Shinseki and we have worked together to support advance funding for veterans' medical care," end quote.

The Senate included advanced appropriations in their budget resolution and Chairman Spratt and Chairman Conrad have reached agreement to keep advanced appropriations in the final 2010 budget resolution.

H.R. 1016 is a common-sense solution to a long-standing problem. Advanced appropriations will not add one more dollar to the federal deficit or national debt.

Mr. Chairman, we look forward to enactment of this legislation so that we can finally guarantee veterans' health care funding will be sufficient, timely and predictable.

My colleagues will now address the details of your legislation and we look forward to answering any questions the committee may have of us.

Thank you.

REP. FILNER: Thank you, Mr. Violante.

Mr. Robertson?

MR. ROBERTSON: Thank you, Mr. Chairman, Mr. Buyer and other members of the committee for allowing the American Legion to participate in this hearing.

From the very beginning, our goal has been a shared goal by the partnership and that's to provide sufficient, timely and predictable funding. We have worked with you and developed a piece of legislation that we believe is a solution to our problems.

Historically, advanced appropriations has been used to make program functions more effectively, better align the funding cycles with program recipients and provide insulation from annual partisan political maneuvering. By moving the advanced appropriations, veterans' health care programs can benefit from these three elements.

The problem the partnership is trying to address is the annual discretionary appropriations not always being available to VA on October 1st. This delay in the timely and predictable provisions of medical funds means that the VA health care system administrators are cautious in decisions that they have to make concerning hiring of medical personnel, procurement of new equipment, supplies and services, and the construct and maintenance of VA medical facilities until those funds are actually appropriated and gets to them.

While Congress has made great strides to increase funding during the past several years, there's still the potential for significant delays in the VA funding process. The core problem in the timely funding of VA medical care is the inherent volatile nature of the annual appropriations process, due in large part to the current medical care funding process used to approve annual discretionary appropriations is clearly flawed and the partnership has looked for a new way to address this issue.

That approach clearly to us is advanced appropriations. We believe that it will stabilize the VA medical care funding and provide the funds truly in a timely, predictable manner. Congress will still have its discretionary authority to approve and oversee these funds. Because medical care discretionary appropriations will be decided one year in advance, VA medical programs could be more closely monitored to make sure the funding levels are sufficient.

More importantly, the VA medical care would be available on October 1st of every year. If advanced appropriations for VA medical care were adopted by Congress, VA administrators would have one year in advance of when that appropriations is due to be able to plan accordingly to deliver quality medical care services to all enrolled veterans who need it.

Most importantly, advanced appropriations allows Congress to improve its oversight responsibilities over VA medical care because VA administrators will be held more accountable due to the fact that they should be able to make better use of these resources.

Advanced appropriations is a technique already used by Congress for many years to approve authority for one year in advance of certain government programs, such as the Low-Income Housing Energy Assistance Program and Section 8 housing.

Although Congress has provided advanced funding for these programs for a variety of public policy reasons, it does not provide advanced appropriations for timely and predictable provisions for VA medical care. We would like to see this changed.

As a nation at war and with the economic difficulties we face today, now is the time to enact this critical legislation. As you and your colleagues consider the conference report for S. Con. Res. 13, the budget resolution for FY 2010, we are pleased to see advanced appropriations for VA medical care included in that congressional blueprint.

The partnership supports that provision in S. Con. Res. 13. Advanced appropriation will increase budget flexibility for Congress to provide sufficient funding, if faced with unforeseen medical circumstances that dictate changing the funding amount. Clearly, advanced appropriation fully addresses two of the three prongs of our sufficient, timely and predictable medical care funding while helping to create an environment that is more likely to produce sufficient funding.

Mr. Chairman, the partnership welcomes the opportunity to continue to work with you and your colleagues towards enactment of the budget reform that will achieve sufficient, timely and predictable annual discretionary appropriations for VA medical care.

Thank you. That concludes my testimony.

REP. FILNER: Thank you, Mr. Robertson.

Mr. Blake.

MR. BLAKE: Chairman Filner, Ranking Member Buyer, members on the committee, on behalf of the partnership I'd like to thank you for the opportunity to testify today.

As already mentioned, the partnership's goal for VA health care system is to ensure sufficient, timely and predictable funding. While much of the attention during the debate of this legislation has been focused on the advanced appropriations aspect, we believe that the second part of the proposal is equally important.

To ensure sufficiency of the VA health care budget, Section 4 of H.R. 1016 would require VA's internal budget model to be shared publicly with Congress to provide accurate estimates for VA health care funding as determined by a GAO audit before political considerations take over the process.

In recent years, VA developed this new methodology to estimate its resource needs for veterans' health care through the enrollee health care projection model, or "the model." Developed in collaboration with a leading private sector actuarial firm Milliman, over the last several years the model has substantially improved VA's ability to estimate its budgetary needs for future years. The model has been thoroughly reviewed by the Office of Management and Budget and approved for use in developing VA's budget.

We recognize that the model itself directly accounts for approximately 86 percent of the real costs to the VA to provide services in a given year. The remainder of the budget needed by the VA primarily goes to long-term care -- approximately 10 percent -- for nursing home and non-institutional care, as well as some smaller programs that make up approximately 4 percent.

The partnership also recognizes that the biggest argument against relying on the model for budget forecasting is the impact unforeseen events, such as exceedingly large numbers of new enrollments or catastrophic events, might have on the budget.

For instance, the report released on April 3, 2009 by the Congressional Research Service titled "Advance Appropriations for Veterans' Health Care: Issues and Options for Congress" addresses this concern directly. The report specifically states that "it is reasonable to assume that future-year budget projections could have variances that could create budget shortfalls if there are unanticipated shocks to the model." We see this as simply a statement of the obvious since this point is true even under the current budget process.

The partnership does not believe that the advanced appropriations proposal somehow changes the actions that Congress would take under these circumstances. There seems to be an assumption that if our entire proposal were to be enacted that Congress would no longer have or choose not to use its authority to provide emergency supplemental appropriations when warranted.

The partnership would also like to point to the detailed analysis of the enrollee health care projection model conducted by the RAND Corporation. Ultimately, we believe that the most important point of the RAND study is that compared to traditional models the current specification offers the benefit of a substantially more flexible and detailed platform from which to plan the VA's appropriations request, monitor budget execution and assess system performance.

If the outcomes of the model were shared publicly, Congress would have better information in order to develop its own appropriations plan for the VA. The partnership simply believes that the outcomes of the model better reflect the needs of the VA health care system than any other method currently used.

Mr. Chairman, we look forward to working with the committee to ensure that your legislation, H.R. 1016, is advanced and ultimately enacted. We appreciate the opportunity to lay out our proposal in detail and would be happy to take any questions that you or the members of the committee might have.

Thank you.

REP. FILNER: Thank you all for your testimony.

Mr. Michaud.

REP. MICHAEL H. MICHAUD (D-ME): Thank you very much, Mr. Chairman, Mr. Ranking Member, for having this hearing today. I think it's very important.

I've always been a strong supporter of making sure that we have adequate funding for the VA but also that that funding comes on time, and there has been a problem over previous years, as the panel had alluded to earlier, as far as getting the budget on time.

My question is -- and I've been very used to dealing with two- year budgets, serving in the Maine legislature and chairing the appropriation committee, and it works very well. But my question being is when you look at the model that the VA puts forward, currently there's a lag in that model and by having advanced appropriations that will add another year in that lag, as far as adequately reflecting what the budget should be within the VA.

I heard Mr. Blake mention in his testimony the fact that yes, even if we do with advanced funding we probably will have to come back and make some adjustments in the following Congress.

Do you feel comfortable -- and I'll ask each of you -- do you feel comfortable with advanced funding, that additional year lag that we can make adjustments down the road to take care of that, or other ways that we might be able to look at that model to make sure that it accurately reflects what's really happening within the VA system?

MR. VIOLANTE: Mr. Michaud, that's a question that we've considered and we do feel comfortable.

We believe that in the beginning there may be some things that need to be ironed out, and that's why we've asked or that the bill contains a review by GAO to make sure that the numbers that are going in are accurate. And we think as time progresses, and with all these numbers being looked at both forward and backwards, that will get us a good estimation in the very near future.

If immediately something needs to be done to correct it, we would hope that Congress would take steps either during the normal budget process or in a supplemental. But we do feel comfortable that this model will work for two years out.

MR. ROBERTSON: Mr. Chairman, we've looked at this as nothing new -- as nothing new. If these numbers were used in the regular process that we're using right now and they were inaccurate, we would go back and fix it.

So it's not like we're chiseling this in a tablet somewhere and bringing it down and giving it to you. It's a flexible document, and all the tools that the Congress has to make adjustments in the appropriations that are given out, whether they're advanced appropriations, whether they're supplemental appropriations, whether the continuing resolutions, are still there.

I agree with Joe: The more people looking at the model and making evaluations of it, I think the better fine-tuned we can make it.

MR. BLAKE: I guess I couldn't say much more than what they've said, Mr. Michaud, except to say that you sort of imply that the assumption would be that emergency supplemental appropriations and things like that would become part of the normal process and that's not necessarily what we're advocating for. We believe if we can get this right there should not be the need for that kind of activity.

I think the point that we tried to make in our testimony about emergency supplemental is the intent of something like that is when things like a shock to the system, as outlined by the CRS report, occur, that's the reason for that being a tool that the Congress has.

I'd also point to the fact that in the RAND study they do have a conclusion in there that they believe that this model is good for short-term budget planning. Now obviously that opens up a big question about what constitutes short-term budget planning. Two years -- we feel pretty comfortable, and we've discussed this, that that probably falls within that window. Now, whether that applies to five and 10-year budget projections out, I'm not sure that we have the same faith.

REP. MICHAUD: And my last question is -- as you know, I'm a co- sponsor of Chairman Filner and Chairman Akaka's legislation dealing with advanced funding and look forward to moving that legislation forward.

My second question is, do you feel it'd be easier to have a more accurate account for advanced funding appropriation for the VA system if in fact the VA and the Department of Defense moves more rapidly with a seamless transition -- electronic medical records and other information that the VA needs? Do you think that would be extremely helpful as well when you look at the accuracy issue?

MR. VIOLANTE: It would definitely be helpful and we appreciated the president back on April 9th when he came out with Secretary Shinseki and Secretary Gates to announce that will be happening, and that definitely will help alleviate a lot of problems.

MR. ROBERTSON: It'll also give you a look ahead that'll be much better as to what population you may be receiving in the next year. And I think the most important thing that a lot of people overlook is we'll all be working off the same numbers. Everybody will be working off the same numbers.

It won't be your committee having one set of numbers, our organizations having another set of numbers and the secretary having another set of numbers. We'll all be working off the basic core package.

MR. BLAKE: Mr. Michaud, I'd like to make one other comment, too. There's another recommendation that's part of this that the VA has made or a plan going forward that I think is critical to this, and that's this idea that when a service member takes the oath and becomes a service member, they then are enrolled into a system where they never leave the DOD and then they have to get back into VA a different way, so that they're always a one-in-the-same system.

I think it makes it better to track these people going forward and you can keep a better -- you can get a better idea of trends as it relates from the beginning of military service all the way through. It creates a different aspect, but it's certainly something we support.

REP. MICHAUD: Thank you, Mr. Chairman.

REP. FILNER: Thank you.

Mr. Stearns.

REP. CLIFF STEARNS (R-FL): Thank you, Mr. Chairman.

Let me just say that Mr. Robertson, let's say we did this advanced appropriation with the Department of Defense. Would you think that that would be a good idea, to have advanced appropriations for Army, Navy and Marine Corps?

MR. ROBERTSON: Would I think it'd be good to make the entire budget advanced appropriations?

REP. STEARNS: I'm talking for the Department of Defense. If we took a segment -- for example, as I understand it, this advanced appropriations account would account for 43 percent of the total VA budget, 85 percent of the total VA discretionary account. So we are talking about almost half of the VA budget being funded through AA.

MR. ROBERTSON: I think you'd have a very good argument if the DOD budget wasn't usually the first one that's adopted. I don't think the DOD appropriations or the DOD supplemental requests are ever delayed over, you know, six or seven months. That's what maintains it.

REP. STEARNS: Well, no, sometimes the DOD is delayed -- we have to do an emergency appropriation, supplementals -- it's constant, you know? Dealing with Afghanistan and Iraq War we had the same problem with late appropriations and these people didn't have money.

So, I mean, if your argument is strong here, then I'm just curious if you feel it should be applied to the Department of Defense.

MR. ROBERTSON: I do not think that the Department of Defense has suffered in the decision-making process due to delays like the VA has on the medical care side of it.

REP. STEARNS: Isn't it true that by doing this, this'll be the first time in the federal budget that we are giving advanced appropriations for health care? We're not doing it for Medicare or Medicaid. I mean, this is --

MR. ROBERTSON: Those are mandatory programs, sir, and they're automatic.

REP. STEARNS: I know, but we're not doing advanced appropriations like we're requesting here.

MR. ROBERTSON: It's automatic, sir. It's effective October 1st.

REP. STEARNS: Would you rather have that automatic, rather than the advanced appropriations?

MR. ROBERTSON: Sir, that's what we initially pushed for and was turned away from by Congress.

REP. STEARNS: So you still want --

MR. ROBERTSON: Congress has asked us to give them discretionary appropriations that they can continue to work with.

REP. STEARNS: If we have this advanced appropriations, what about the flexibility for the secretary of Veterans Affairs? Doesn't he lose some of the flexibility he needs when he looks at -- I mean, we've talked about -- Mr. Blake talked about the RAND study; we also have input from the GAO that indicated: "The provision of advanced appropriation would use up discretionary budget authority for the next year and so limit Congress's flexibility to respond to changing priorities and needs. The longer projection period increases the uncertainty that data and projection used."

And in addition to Congress losing its flexibility, the secretary of Veterans Affairs loses his flexibility. So what would you say to that? There's no flexibility provided.

MR. BLAKE: Mr. Stearns, could I answer that question?

REP. STEARNS: Sure.

MR. BLAKE: First I would say that I don't believe the secretary would lose any flexibility.

What we're proposing doesn't in some way change the authorities that the secretary has and how he spends his money, whether he can transfer funds around, and ultimately the money will become available for all of the accounts in the VA on the same date, assuming that all of the other accounts not governed by advanced appropriations are approved before October 1st.

My understanding of the GAO findings, which I think you referred to their testimony that was submitted for the hearing today, which was -- I just glanced over it before we began this morning -- I think that their finding is targeted more at their concern about the flexibility Congress would have.

And my sense of reading that suggests that by moving this into an advanced area, it's removed from the current budget debate and it's a pot of money that the Congress no longer has to manipulate in some fashion to address other priorities or not that they may have.

REP. STEARNS: Mr. Blake, let me just read: "In January 2009 the GAO found that the VA's assumptions about the costs of providing long- term care appear unreliable given that assumed cost increases were lower than VA's recent spending experience and guidance provided by the Office of Management and Budget."

So they're pretty clear they don't think that the projections are reliable, and with that, in fact, if you had the advanced appropriations, then you have assumptions that are based upon unreliable data.

MR. BLAKE: Well, to your point, Mr. Stearns, the projections they refer to refer to the long-term-care piece of the VA which is actually not governed by the model itself, and that's something we see as a problem. I even mentioned it in my written statement.

And I won't argue with you -- I agree if there's an area where they've clearly manipulated and made false assumptions, it's in how they've planned their long-term care. I think in the recent past we've seen that the VA has wanted to get out of the business of institutional long-term care --

REP. STEARNS: Mr. Blake --

MR. BLAKE: -- and I think their assumptions reflect that.

REP. STEARNS: They also move not just to long-term care, they said they had a report that indicated that "the VA underestimated the cost of serving veterans returning from military operations in Iraq and Afghanistan."

So it's not just in long-term, it's a consistent pattern that they found the unreliability of the data, and so that's why -- you know, we're all on the same team here, you know? I think serving on the Veterans' Committee almost 20 years that I would like to have that flexibility and be able to come out and help when there's unreliable data.

But now, subject to what the GAO found and the RAND study, the flexibility's gone from Congress, gone from the secretary of Veterans Affairs and based upon unreliable data -- not what I said, what the GAO said.

MR. ROBERTSON: Mr. Stearns, if I may, with advanced appropriations the secretary would still go through the regular appropriations process and if he felt that the appropriation level for the next year was too high, he could state that from the very beginning of the budget process with the president's budget request.

But secondly, which I think is a very important point, is that you're making an assumption -- or that report is making an assumption that the model that was used was what was advanced by the administration, and I don't think that's always the case. I think the model may have had higher numbers or better predictions. It's just when it was passed back through the OMB process it may have been skewed.

REP. STEARNS: Thank you, Mr. Chairman.

MR. VIOLANTE: If I could just answer that also, I mean, Steve is right. If you look at that report it talks about the fact that --

REP. STEARNS: The GAO report or the RAND report?

MR. VIOLANTE: Yes, the GAO report that VA compared projected costs to the anticipated request, not based on the needs.

And the other thing about this legislation, it does not require Congress to use the numbers that the model puts forth. I mean, everyone has flexibility. The idea was to have this model made available so everyone would know what the needs are.

I mean, Congress may not agree with those needs, and Congress can add more or subtract money from that. This legislation does not bind you to the VA's model.

REP. STEARNS: Thank you.

Mr. Chairman, good questions for the secretary of Veterans Affairs when he comes up.

REP. FILNER: Thank you, Mr. Stearns.

Mr. Walz.

REP. TIMOTHY J. WALZ (D-MN): Thank you, Mr. Chairman and Ranking Member.

Thank you to each of you once again for all you do for our veterans. Maybe I'll have to take responsibility for the black cloud that entered here, both literally, as I got soaked on the way, and figuratively, as I couldn't find my caffeine and everything else went wrong today.

The one thing I could count on, though, was coming here on this important issue and I think moving in a positive manner to kind of break this jinx I've been under.

I'm going to speak heresy here, because I'm trying to figure out, on the flexibility side of this, too -- I think we do this thing right because many of us feel this gives the flexibility to the secretary and to his managers.

Those of us who've been out there and watched the decisions that had to be made by hospital administrators on cutting back nurses and care at the last minute and then maybe being able to rehire them back down the road or different things that were going on, I think the potential lies here to get efficiencies out of the system that we may have to deal with the issue of rescissions, of money coming back. Now, wouldn't that be odd, if we were able to get the system to where it was functioning correctly, and if we do this right we shouldn't always have to.

And I'm glad that you brought this up, Carl, focusing on this, because I too want to make sure -- and I think Mr. Stearns brings up a valid point on allowing that flexibility. But the way I understand it is if the budgeting processes are more in the hands with advanced appropriations of the secretary and of his managers who know how to deliver the care, I think we've got a much better chance of coming to the number of what it actually takes to care for our veterans and get it back.

Would you agree with that, that that's the point we're trying to get to, that this doesn't necessarily just mean more money, faster money; it means the correct amount of funding at the right place and right time to deliver the care?

MR. VIOLANTE: You're exactly right, and that's what we're trying to do with this legislation is to get to that point where we know what the needs are, not what the government wants to spend on veterans.

MR. ROBERTSON: This is the old garbage in, garbage out. If you don't have good data to start with, if we're operating off of five or six or 10 or 15 different proposals, then how do we know which one is the best one?

If we have a good model that the taxpayers are paying for, why aren't we all using it? Why aren't we all working off the same sheet of music and coming up with the best plan possible? And it does provide, I think, a tremendous amount of flexibility.

And you're exactly right: If I was a brand-new researcher coming out of a medical school, which system am I going to go to -- one that doesn't know when its budget's going to be approved and how much they're going to have to operate their system? If I'm uncertain of what the fate is of the VA medical care system, I need to go someplace else where I have a little more security.

MR. BLAKE: I agree wholeheartedly with you, Mr. Walz. I mean, even in our statement we make the point that we're not suggesting that we just want increased budgets year after year after year. If ultimately we get this right and it's reflected that -- I mean, I think we all know that the patient population of the VA is actually slowly decreasing, or at least the growth of it is, and the discussion about the World War II generation and once it's gone will have a significant impact on the utilization in VA.

And so we recognize that fact and we accept that, and so the impact that will have on the budget, if it drives the budget down some, so be it. We just want to get it right.

REP. WALZ: Again, I think my colleague from Florida brought up an interesting point in asking about other appropriations. I think there's a valid argument to be made there and I think, Steve, you're right about this, that others didn't have to do it and there might be a difference in appropriating a building or something as opposed to the care of one of our warriors. I understand that's a pretty strong moral argument.

But I do think that what the president's talking about and what his secretaries are talking about is a total change in efficiencies and transparencies how we do this. I've worked in organizations. I'm not talking about putting government on autopilot. What I'm talking about is our responsibility is to get that out. The secretary's responsibility is his managers are better at understanding how to deliver that. Our job is to provide oversight, because I worked in school systems where every single year we got pink-slipped as a way to just assume we didn't know if we're going to have the money to have you back, so everybody got laid off automatically and you got hired back on again in the fall until you received quite a bit of seniority.

That created massive problems in how to figure things out. It created a sense of -- in the organization, no sense of consistency, and the morale in the organization was hurt by that lack of understanding what was coming.

So I think there's -- we're not going to talk about intangibles. We're going to measure them, we're going to show, we're going to provide how this works, but I think the proposal is solid. I've supported it, I think you've thought through some of the difficulties, and I think there warrants this discussion further on how we make government more efficient.

I yield back my time, Mr. Chairman.

REP. FILNER: Thank you, Mr. Walz.

Mr. Moran.

REP. JERRY MORAN (R-KS): Mr. Chairman, thank you.

I would yield my time to the gentleman from Florida, who has additional requests or questions. Thank you.

REP. STEARNS: I thank my distinguished colleague.

Mr. Chairman, I thought I might just continue this little GAO with Mr. Blake and Mr. Robertson, just to have them aware of what the conclusions are.

I think my colleague mentioned a little bit about putting this whole thing on autopilot, and I think that's obviously a concern when we want to have flexibility for both the secretary, and as publicly elected members of Congress, why wouldn't I want to get involved with priorities here?

And I feel, Mr. Robertson, by this advanced appropriations, I'm giving up a little bit. He used the word "autopilot," and I'm just going to use his word to say that, you know, we're tying up members of Congress from having the flexibility we need, not to mention the secretary of Veterans Affairs.

Let me just read, if you would allow me to read from their concluding comments of this recent testimony that the GAO did. Now, lots of times if you're -- you know, people quote OMB and they say, "Well, that's the White House." And then if your party's in power and GAO is quoted, you say, "Well, that's Congress and that's your party." But I mean, this is the GAO today and I think most of us respect -- regardless of what party we are, we respect what the GAO has to say.

I'll read a little bit of what they said. "Providing advanced appropriations will not mitigate or solve the problem which is noted above regarding data calculations or assumptions in developing the VA health care budget, nor will it address any link between costs, growth and program design. Congressional oversight will continue to be critical." So you don't want to tie our hands here so that we don't have this flexibility.

"If the VA is to receive advanced appropriations" this is GAO talking about -- "for health care, the amount of discretionary spending available for Congress to allocate to other federal activities in that year will be reduced. In addition, providing advanced appropriations for health care" -- VA health care -- "will not resolve the problems we have identified in the VA's budget formulation." So --

MR. ROBERTSON: Mr. Stearns, are they basing this on all of the other advanced appropriations that have been awarded for over the years? Is that a problem that's common amongst all the other federal programs who receive advanced appropriations, that it's running amok?

Because if we've got that many programs that are receiving advanced appropriations that they're basing this on -- because we haven't ever done this as a VA appropriations. So my question is, is this report being based upon their experience with other advanced appropriations --

REP. STEARNS: No. I'm told by counsel it's not based upon that. In fact, there's not as many advanced appropriation programs as you indicate. So counsel's telling me no, that's not true.

So, I mean, the fundamental question is that the three of you have to, in your conscience, think about is that you're asking something that is -- based upon the GAO's finding is going to tie our hands, and in the area where you want to have this improved health care will not resolve the problems because you're advancing money and no one knows, based upon the data that's provided, that it's going to do the job.

So, I mean, this is just a sort of a general comment -- I mean, you're welcome to comment, but I'm just reading from the GAO report and not having had a lot of experience, frankly, so I can't even answer your question if it's legitimate whether advanced appropriations have worked or not.

I mean, that's a good question. I think myself and counsel should --

MR. ROBERTSON: Mr. Stearns, with all due respect, when Mr. Buyer was chairman and he called up the question about how the methodology was being determined by all of the groups and everybody else, we all had to lay our cards out on the table, it was clear that we weren't doing it right the way the process was going. The data was clearly well outdated. I mean, they didn't even take into consideration we were in a war.

So how did we fix it then? We made the adjustments, we got the additional appropriations, the president came back with a new budget request, and they fixed the problem. When you do advanced appropriations, it's the exact same thing. The money's not spent, it's out there on the wall.

If we determine between now and when that appropriations goes into effect that it's inaccurate, we still have the vehicles to correct it. You have a rescission process. If the bill goes into effect and the money's appropriated, you can go back and take money back if you feel it's inaccurate.

So I hate this thought that this is automatic pilot. It's not. It's still subject to review.

REP. STEARNS: Well, let me just conclude.

Mr. Robertson, can you cite an example where Congress has taken money back in -- I'll give you 230 years of history.

MR. ROBERTSON: I'll be glad to show you my tax return.

REP. STEARNS: Okay, well, you're -- (laughter) -- you're the only one. (Laughs.)

MR. ROBERTSON: It's called concurrent receipt.

REP. STEARNS: Yeah, well, in my 20 years of Congress, I've never seen Congress take back money, so if that's a new era, I'm looking forward to it.

REP. FILNER: The president has done rescissions all along, Mr. Stearns.

REP. STEARNS: Yeah, well, I'm not thinking in the way he's thinking, that we'll see government -- Congress come back and take money back.

But in defense of what you're talking about, the current budget and appropriations process is not perfect up here, that's for sure, and we're just as sometimes unreliable as anybody.

So thank you, Mr. Chairman.

REP. FILNER: Thank you.

Ms. Halvorson.

REP. DEBORAH L. HALVORSON (D-IL): Thank you, Mr. Chairman.

Thank you all for being here, and I have an advisory committee for veterans and I just met with them on Saturday, and we had a lot of discussion over health care. In fact, my district, the number one calls we get are from veterans and people who feel that their health care needs are not being satisfied; also, the smooth transition that we need to see from the Department of Defense into the Department of VA.

But Mr. Robertson, you make a very, very good point: Just because you have an advanced money doesn't mean you spend it. And I'm really concerned, from spending a lot of years in state government, the fact that you hoard all your money in the beginning because you don't know what's going to come up and then you spend it needlessly because if you don't spend it, you're not going to get it next year.

And that's why we've got to remember -- what I'm hearing -- and I may be new and I'm trying to keep this simple, but what I'm hearing is we're putting politics before the health of our veterans. And we need to put our health of our veterans and our veterans first, where if it's going to help the health of our veterans to have an advanced appropriation, I think no matter what, we should be doing that.

But for Congress to say they want more control but that hurts our veterans, I think that's absolutely ridiculous. We should be putting the flexibility in the hands of the secretary so that our veterans are the ones that are taken care of, because any time Congress wants to pull that back and make sure that it's more efficient, they can.

So my question to you is if we have an advanced appropriation, is it going to help take care of our veterans better? And any one of you can answer, or all of you can.

MR. VIOLANTE: Definitely. I mean, we wouldn't be supporting it if we didn't believe that this will benefit veterans getting proper, timely, quality health care, and I think the statement I asked to be introduced into the record from former VA personnel, including former Secretary Principi, Deputy Secretaries Hershel Gober and Gordon Mansfield and almost two dozen other directors indicate that the biggest problem they have is not knowing what they're going to get and when they're going to get it.

And what happens is -- and we've talked to a number of directors -- when they get their budget three months late, what happens is they can't hire the doctors at that time. They have to contract that, which then costs them more money to do that.

So I think all in all, advanced appropriations will solve a lot of problems.

MR. ROBERTSON: And ma'am, we're all held responsible. Our organizations -- I can speak for the American Legion -- I can't speak for my partners but I have a true feeling that it's the same -- if it was wrong, if it was doing -- if advanced appropriations hurt the veterans community, we would be the first ones up here yelling and screaming stop the wagon, stop the wagon.

But right now we feel that this is the best approach, short of mandatory funding, to be able to make sure that we're getting timely, sufficient and predictable revenue.

MR. BLAKE: You know, Ms. Halvorson, the irony of this is everyone, I think, deep down believes that there's a need for some kind of funding reform in the VA health care system. Mandatory funding was simply -- it just didn't have the -- there was no will to support it.

REP. HALVORSON: Why?

MR. BLAKE: So -- (laughs) -- we --

REP. HALVORSON: Okay, I'll talk to you somewhere else.

MR. BLAKE: Because of PAYGO considerations and a number of things.

REP. HALVORSON: Okay.

MR. BLAKE: Because it would become a mandatory program. And I'm not sure that we -- having had time to really digest this, I think we believe that this is better because this proposal actually answers a number of the concerns raised by mandatory funding as it relates to Congress and its actions.

But I think that this will simply allow the VA to be more efficient, and if we can get to the bottom line so that the VA's able to provide better care in a timely manner, then so be it.

REP. HALVORSON: Well, and to me that's better care, more efficiency, transparency, timely manner -- to me, that's what it's all about.

And I also want to congratulate Secretary Shinseki for sitting here through all the panels and for being on the third panel, because I've been through a lot of committee hearings where they sit through the first panel and leave.

You know, congratulations, Secretary, for wanting to hear what we on the committee also are asking, because this is so important to us. And you know, we have created a lot of veterans and it is up to us to make sure we take care of them. And I haven't seen that happening. You know, this is very personal.

You know, I have a father, a husband and a son all serving or who have served, you know, and I congratulate all of you for wanting to come to us to make sure that this is a priority.

So I yield back. Thank you.

REP. FILNER: Thank you, Ms. Halvorson.

Mr. Buchanan.

Mr. Bilirakis.

Mr. Teague.

REP. HARRY TEAGUE (D-NM): Yes, I just want to say, you know, that definitely I'm in support -- well, first, thank you, Mr. Chairman and Ranking Member, I'm sorry.

But I do want to say, you know, that I am in support of the advanced appropriation; that's why I wrote the letters.

I think the fact that we allow the gaps to help in the coverage of our veterans and they never let the gaps occur in their protection of us, I think it's an embarrassment and I definitely want us to have it.

Thank you.

REP. FILNER: Thank you, Mr. Teague.

Mr. Buyer.

REP. BUYER: (Off mike) -- what I was doing was looking at the legislation and then listening to your testimony.

Is your testimony relying upon what is in H.R. 1016?

MR. VIOLANTE: Yes.

REP. BUYER: Okay. Do you -- the advanced appropriation relies upon the enrollee model. Do you have the confidence in its planning and predictability?

MR. VIOLANTE: We believe the model is good, that there are, as we've seen from numerous reports, there are problems with some of the information that goes in, and it's our hope that with GAO looking at it, constant look-back at this situation or looking at it beforehand, that we get this refined.

The model is good. It's what goes into it that's the problem or what happens with OMB when those numbers come out.

MR. BLAKE: Mr. Buyer, I'd like to make one comment along that line, too. I think the problem is we don't know what the model in its first form puts out as a projected need. We don't believe, I think, as the partnership, that what ultimately gets submitted as the president's budget request on the first money in February reflects what is the initial projection of the model.

There are too many other political and policy considerations that get added in after that point that I think lead to what we see in February and begin the debating process. So if we had the opportunity to at least see that first, we could make a better judgment and a better decision.

REP. BUYER: I'm going to embrace what my friend Steve just testified to -- Mr. Stearns -- when reflecting upon the past years when we looked at the model and it was the inputs. And now we have RAND's analysis of the enrollee model and says it's a pretty good model with regard to the short term.

But with regard to long-term predictability, it gets a little fuzzy -- it's harder, it's a little more difficult. Those are my words, but that's kind of what RAND is saying to us.

So with regard to our level of confidence and the predictability for longer term, I think we have to acknowledge that's what we have to continue our oversight, if this is the pathway that we want to take.

Would you concur with that, Mr. Violante?

MR. VIOLANTE: Again, it's not defined what short-term and long- term is in that report, and I would say that two years out is not long-term, but yes, the further out you get the more unreliable anything will be.

REP. BUYER: All right. So then I will take it that you also concur with RAND's review and evaluation of the current model.

With regard to the accounts, if we're going to use the word flexibility, and that's what's sort of being danced around here by the panel and by different questions, the flexibility isn't necessarily there in the legislation itself. I mean, I went and grabbed the legislation, I went and looked at it, and it applies to specific line- item appropriation accounts.

And so excluding out of this would be your research and your construction, and the one that was really bothersome that we'd better take a good look at is IT, because I don't know how the secretary can really do his job with regard to the IT architecture when you have medical IT also. I mean, it's all synergistically intertwined and I think we're going to need to give the secretary some of that, quote, "flexibility" we're talking about.

We may need to make some amendments of this legislation to make sure the secretary is able to move necessary dollars among accounts. We do that with regard to the Department of Defense. How challenging it would be for the secretary to have been the chief of staff of the Army, with the ability to move funds among accounts and work with the Appropriations Committee but then not be able to do that in the VA.

So I think if truly our interests then are serving the veterans and making sure appropriate dollars are where they need to be, we should look at some discretionary authorities to the secretary. Would you agree?

MR. BLAKE: Mr. Buyer, I don't think we would have any argument with that. I mean, we're interested in ensuring that the legislation accomplishes the best possible outcome and ultimately meets our goals as the partnership.

I wouldn't argue that necessarily all of the programs of the VA wouldn't benefit from advanced appropriations. However, there are no other programs in the VA that have something like the enrollee health care projection model to rely upon in determining its resource needs and outcomes.

And as far as the -- just -- and as far as the --

REP. BUYER: Well, let's explore the IT issue, because this will be very challenging for the secretary, for medical IT and equipment. Concur?

MR. ROBERTSON: And I think the other thing that's important is, as Mr. Stearns pointed out, that it's such -- by the time you get your (comp and pin ?) appropriations and the medical care appropriations, there's only a small portion left to the VA budget.

Hopefully, that would be an incentive to get the budget through by October 1st, that maybe the advanced appropriation would be the driving stimulus to get the rest of the package done in a more timely manner.

What's happened in the past, we've had many bills that have been agreed to by the House and the Senate, have been agreed to by the president -- it just never got out of Congress over to the White House because of the other appropriations that were attached to it. That's what we're trying to get away from, and if this helps us achieve that goal, even more the better.

REP. FILNER: Thank you.

Thank you, Mr. Buyer.

We thank you for your being here.

Mr. Stearns, just if I may -- I think the issues you raise are a little bit of a red herring in that nothing changes from the way we do it now except that it's a year further out. If the model is bad, the model's bad for this year and next year and every year.

We're discussing the exact same issues, the exact same situation, and we have a chance to change it, just like we do now. So I don't find any of your concerns really applicable because we're just -- if we were discussing FY '11's budget right now instead of FY '10's, we're going through with the same oversight, the same flexibility, the same process, and if the model is wrong it's going to be wrong -- (laughs) -- no matter what if we were doing it, you know, last year, even.

So I understand your concerns; I don't think they really would affect the working of this Congress.

REP. STEARNS: Will the gentleman yield?

REP. FILNER: Sure.

REP. STEARNS: Let's say that it passes and we're the next year out and we find there's a problem. How do we go about changing it?

REP. FILNER: Same way we would change it if it's this year's.

I mean, a couple years ago the VA came back with us, they say we didn't calculate it right in the current year, and we had to give them a supplemental. Same thing could happen at any point in our appropriation cycle now.

REP. STEARNS: Okay. Now let's take the opposite -- that they have a leftover, they have excess funds. Can we get them back? How do we get them back?

REP. FILNER: There are provisions for both -- the president, by the way, has enormous rescission authority, which has been used. You said earlier you don't know when -- I mean, every president has used rescission authority numerous times.

REP. STEARNS: So the third year, then, he would use his rescission authority because of the second year to get the money back.

REP. FILNER: No, it could happen in the -- the rescission is the existing situation. It doesn't take away any of the -- as they kept saying, it doesn't take out any of the tools that we have now. I mean, nothing is changed, except the fact that a medical director in Florida knows what's coming and can plan their activities.

REP. STEARNS: I'll just conclude, and thank you for the time, Mr. Chairman.

This is from the RAND study.: "The longer the period of time between the baseline year and the budget planning year, the higher the risk that past budgets do not reflect the resources required by the VA to achieve its --"

REP. FILNER: No question. No question. But, you know, the model could be wrong for this year. But we are balancing two things: the fact that they cannot count on a budget now, and we've had budget -- you know, this one this year was six months late, right? Five months, six months late -- versus that uncertainty.

So which one is more important that we look at now? I think the fact that any medical director that you know in Florida or I know in San Diego cannot hire, they cannot plan, they cannot assure anything that's going on in their own hospital when a budget is five months late. Is that better than or is that worse than we may be some dollars off because we did it a year early?

That's what we have to balance.

REP. STEARNS: No, and I see your point.

REP. FILNER: I apologize for downgrading your concern.

REP. STEARNS: No, no, no, and I see your point. I just question -- I think our big issue is the flexibility.

REP. FILNER: I think we have the same -- (off mike) -- either way.

Anyway, thank you, panel one.

We will try to start panel two, where we have a senior economist for the RAND Corporation, an analyst -- Congressional Research Service, and in fact -- and the Agency for Healthcare Research and Quality is represented.

I'll just go in the order that I have, unless you have a different intention.

Katherine Harris is a senior economist for the RAND Corporation -- so some of your concerns, Mr. Stearns and others, can be dealt with.

Ms. Harris.

MS. HARRIS: Thank you, Chairman Filner and Ranking Member Buyer.

Today I will discuss findings from RAND's recent evaluation of the VA's enrollee health care projection model.

First I will summarize findings from our evaluation, discuss the model support for advanced appropriations and discuss our recommendations for improving the model.

To support budgeting and planning for its broad mission, the VA relies on a complex forecasting model to project demand for VA health care 20 years into the future. The VA uses the third-year estimates in formulating its annual budget request. I refer you to my written testimony for a short overview of how the model works.

The VA asked me in to work in conjunction with an independent actuary to review the validity and accuracy of the model. Our evaluation found that the model is useful for short-term budget planning and compared to methodologies used in the past the model offers the VA a high degree of flexibility and detail in planning its budget.

However, we also found that the model may yield misleading forecasts when used for longer-term strategic planning and analysis. This is because the model's structure does not account for key drivers of the future demand for VA care and the costs of providing it.

These longer-term applications would require measures of cost -- the costs of providing care that are independent of the current appropriation, information about VA's capability to expand its capacity to meet future demand and about factors driving veterans' reliance on VA facilities.

In the absence of such information, model forecasts rely on a number of unrealistic and untested assumptions. For example, the model assumes that unit costs do not vary with changes in treatment capacity that are likely to occur over time. This is akin to assuming that the VA pays for care on a fee-for-service basis similar to Medicare.

Finally, we found that the model's complexity limits its transparency and tractability. This complexity stems from two sources. The first is a series of major adjustments to commercial utilization benchmarks that are undertaken in order to equate a commercially enrolled population with the enrolled population in veterans.

Second, the model calibrates these adjusted benchmarks back to actual VA workload data and these calibrations embed past VA appropriations in model forecasts. Past appropriations may or may not be an accurate reflection of enrollee demand for VA care.

Advanced appropriation would in essence lengthen the time horizon over which the model forecast resource requirements from three years to four years. Under advanced appropriation, the FY '09 model baseline would inform the '13 budget request.

The expanded time period between budget planning and the time the spending actually occurs makes it even more imperative that the VA have robust budget-planning tools at its disposal. Because past budgets are key drivers of the model's short-term forecasts, the longer the period of time between the baseline year and the budget- planning year, the higher the risk that past budgets do not reflect the resources required by the VA to achieve its mission.

We made recommendations for improvement in three areas.

First, to provide more tractable and transparent support for short-term planning, the VA should consider simplifying the model to rely more exclusively on its own administrative workload data.

Second, to enhance the model's ability to inform long-range planning the VA should consider modifying subcomponents to allow more robust forecasting of demand for and the cost of providing care for veterans in a changing policy environment.

Fortunately, the model is structured in such a way to allow modifications to support longer-term planning and policy analysis applications without disrupting its usefulness for short-term budget planning.

Finally, the VA should also consider other improvements, which include making the documentation more approachable and complete, the involvement of a wider range of expertise in developing the model, and periodic review of the model by independent experts.

Thank you for your time, and I'm happy to answer any questions.

REP. FILNER: Thank you, Ms. Harris.

Mr. Panangala is analyst in veterans' policy for the Congressional Research Service.

You have five minutes, sir.

MR. PANANGALA: Chairman Filner, Ranking Member Buyer and distinguished members of the committee, my name is Sidath Panangala from the Congressional Research Service.

I'm honored to appear before the committee today. As requested by the committee, my testimony will highlight some of the issues that are discussed in our report, entitled "Advanced Appropriations for Veterans' Health Care: Issues and Options for Congress."

As a supplement to my testimony, I have included this report for the record. CRS takes no position on any of the legislative proposals to authorized advanced appropriations that fund certain accounts of VHA.

I will begin by briefly providing an overview of VHA's current budget formulation process and the current appropriations process for health care programs.

Historically, the major determinant of VHA's budget size and character was the number of staffed beds, which was controlled by Congress. The preliminary budget estimate, to a large extent, was based on the funding and activity of previous years. VHA developed systemwide workload estimates by type of care using forecasts submitted by field stations.

In 1996, Congress enacted the Department of Veterans Affairs and Housing and Urban Development Independent Agencies Act, requiring VHA to develop a plan for allocation of health care resources to ensure that veterans eligible for medical care who have similar economic status and eligibility priority have similar access to care, regardless of where they reside. We also had the Health Care Eligibility Reform Act of 1996, which established an enrollment system.

As part of those requirements, VHA began to establish the demand model in 1998. The model has evolved over time and develops estimates of future veteran enrollment, enrollees' expected utilization of health care and the costs associated with that utilization. A detailed description has been given in our report and in the RAND Corporation study as well.

VHA's budget request is formulated using this enrollee health care model to estimate the demand for medical services among veterans in future years -- each year, through the annual appropriations process, when Congress appropriates funds to these accounts that comprise medical services, medical support and compliance, medical facilities and prosthetic research.

One proposal that has been discussed in the past few months is to provide more predictability in funding for the VHA in the future is the use of advanced appropriations for certain medical care accounts. An advance appropriation provides funding that is budget authority to an account one fiscal year or more ahead of schedule. So if in an annual appropriations act, let's say 2010, has authority provide to an account in FY 2011 or a later fiscal year, that would be considered an advance appropriation.

Let me highlight two potential implementation issues that were discussed in our report. One concern that has already been discussed is the impact of funding based on this model. GAO, in a recent testimony, and I quote: "The formulation of VHA's budget is by its very nature challenging and is based on assumptions and imperfect information on health care services VHA expects to provide," end of quote.

The RAND Corporation also found that while the model projection projects reasonably projects reasonable -- (inaudible) -- for the future enrollment estimates in a stable environment, it has also found that we have no understanding of the future specificity of explicit scenarios regarding the relationship and the utilization in future years. Under such findings it is reasonable to assume that future- year budget predictions could have variances that could create budget shortfalls if there are unanticipated shocks to the system.

Just to give an example of this is when you have -- for example, there's a concern in Congress -- what happens if a lot of people start losing health care due to unemployment and loss of -- because of economic conditions? Would the VA be able to anticipate that burden coming into the VA?

Another issue that has already been raised is the IT issue. There are some options that Congress might want to decide on long-term financing of VA health care. And one option might be the creation of an independent entity modeled on the lines of the Medicare Payment Advisory Commission.

Congress established MedPAC in 1997 to advise Congress on issues affecting Medicare program. MedPAC is tasked to analyze access to care, quality of care and other issues affecting Medicare.

The commission meets publicly, discusses Medicare issues and policy questions, and then develops and approves its report and recommendations to the Congress. Such a program for VHA might independently analyze issues facing VHA and advise Congress on funding for both short- and long-term issues affecting VA health care. It could bring transparency to VHA's funding process and create credibility, particularly among key constituents groups. This could, in turn, provide an added layer of transparency and accountability to VHA's budget process.

This concludes my statement. I will be pleased to answer any questions the committee may have.

Thank you.

REP. FILNER: Thank you, sir.

Jessica Banthin is the director of modeling and simulation for the Center of Financing, Access and Cost Trends with the Agency for Healthcare Research and Quality.

What is that?

MS. BANTHIN: (Laughs.) Good morning, Mr. Chairman.

REP. FILNER: Just tell us what your agency does. (Laughs.)

MS. BANTHIN: I'm the director of the division of modeling and simulation. I had a small group of economists that develops microsimulation models related to health care.

Good morning, Mr. Chairman and members of the committee.

Thank you for the opportunity to testify before the committee on the issue of long-term projection models. I would ask that my written testimony be made part of the official record.

REP. FILNER: That's ordered, thank you.

MS. BANTHIN: I want to mention that the Agency for Healthcare Research and Quality has benefited from extensive collaboration with the Department of Veterans Affairs in areas of health services research, patient safety and quality of care. We consider the VA an important partner in improving health care.

At AHRQ, we have extensive experience developing sophisticated health care models based on household survey data. For example, we've developed a simulation model that estimates the number of eligible uninsured children in the U.S. and can be used to project enrollment in Medicaid and the Children's Health Insurance Program. The model has also informed outreach efforts to increase enrollment of eligible children. Details about this model are included in my written testimony.

I've had the opportunity to review the RAND report on the VA enrollee health care projection model. The VA model includes three major components: an enrollment model, a utilization model and a unit cost model.

The RAND report draws a distinction between actuarial models that are based on historical trends and economic models that incorporate behavioral parameters. There are caveats to all long-term projection models.

Mr. Chairman, the long-term projection of costs and utilization is very difficult because of the number of factors that affect use of health care services. Factors include unpredictable changes in both the demand for and the supply of various services. For example, technological change can yield new treatments for medical conditions and improved diagnosis of ailments. Changes in the prevalence of disease can affect the demand for care.

When AHRQ publishes micro-level projected health care expenditure data we refrain from applying complex models and behavioral assumptions. Instead we rely on publicly available projections from census data regarding demographic changes and from CMS regarding aggregate health expenditure growth. We project expenditures using this relatively conservative approach that is more aligned to actuarial methods.

AHRQ-projected expenditure data are publicly available so that modelers can then use these data as a baseline from which to develop more complex economic simulation models that incorporate various behavioral parameters. These more complex models are critical for policy analysis and this is one of the primary benefits of developing models with behavioral parameters, but their long-term accuracy in projecting expenditures is very hard to gauge.

Programs such as the VA face several challenges in projecting utilization and costs for its patient population when there is limited information on other non-program sources of care that patients may access. This issue is more pronounced for patients under age 65 without Medicare claims data to examine.

To the extent that the VA patient population is unique and differs from the commercially insured population, such data limitations present additional challenges in projecting future utilization and costs.

In particular, it is important to account for illness severity or morbidity when projecting costs. Morbidity is a strong predictor of both enrollment and use of services. This can be measured with clinical measures but can also be accounted for with simpler survey- based measures of patient-reported physical and mental health status, functional status and work disability. These patient-reported measures have strong predictive power in many economic models of demand for care.

In conclusion, I want to emphasize that there are caveats associated with all long-term projection models whether they use actuarial or economic methods. In addition, the accuracy of all projection models depends critically on the available data. Without sufficient data there may be areas in the models that rely on best guesses rather than solid information.

As most modelers know, long-term projection models can constantly be improved and enhanced. This is usually an ongoing process. The VA enrollee health care projection model is a very sophisticated model that benefits each year from better information on the current veteran population.

Mr. Chairman, this concludes my prepared testimony. Thank you, and I would be happy to answer any questions.

REP. FILNER: Thank you.

Mr. Williamson is director of the health care team for the VA/DOD health care issues with GAO and accompanied by Susan Irving, who is the director of the federal budget analysis and strategic issues.

MR. WILLIAMSON: Thank you, Mr. Chairman. We are pleased to be here today as the committee considers potential changes in how funds are appropriated for VA health care programs.

With me today is Susan Irving, director of federal budget analysis from our Strategic Issues Team. Together we will address VA's budget challenges and offer views on advanced appropriations for VA.

By its very nature, VA's budget formulation is challenging since it is based on assumptions and imperfect information, which is further complicated in the changing environment VA faces and the differing veteran populations it serves.

In 2006 and 2009 we issued reports that examined some of the challenges VA faces in budget formulation, including obtaining sufficient data for useful budget projections, making accurate calculations and making realistic assumptions.

For example, our 2006 report on VA's overall health care budget found that VA underestimated the costs of serving veterans returning from military operations in Iraq and Afghanistan, in part because estimates for fiscal year 2005 were based on data that largely predated the Iraqi conflict.

Earlier this year we again reported on budget formulation issues for the long-term care portion of VA's budget which is formulated separately from VA's budget projection model. Specifically, in its 2009 budget request VA may have made unrealistic assumptions about the costs of both its nursing home and non-institutional long-term care and workload projections for non-institutional care.

To its credit, VA has implemented a number of recommendations to address past budget issues, but continued vigilance is necessary.

Turning now to the issue of advanced appropriations for VA, there are a number of important considerations in deciding on changes in the appropriation cycle. As a first step it is critical to understand the true nature of the problems that exist in terms of how and to what degree circumstances surrounding the current budget approach have impacted VA's past ability to provide quality health care to veterans.

Also important is to consider the current flexibility that VA already has. For example, VA carries over as much as $600 million annually and has authority to move funds among its health care accounts, both of which can provide flexibility to respond to changing circumstances.

Any proposals to change the appropriation cycle should be considered in the context of the budget structure and the congressional budget process, including budget controls as well as the impact on congressional flexibility and oversight.

One issue relates to the impact on Congress's ability to consider competing demands for federal funds and the allocation of resources among other critical areas such as national defense, homeland security, energy and natural resources, education and public health. Currently, the Congress sets totals for discretionary spending for five years through the congressional budget resolution.

The provision of advanced appropriations would pre-commit or use up some of next year's discretionary budget authority, thereby limiting flexibility to deal with changing priorities and reducing the amount available for other high priorities.

A related issue is a potential impact on congressional oversight. Given the challenges VA faces in formulating its health care budget and the changing nature of health care, proposals to change that cycle deserve careful scrutiny.

Providing advanced appropriations will not solve the problems we have previously reported regarding the data used or the calculations made during budget formulation. Continued congressional oversight will be critical.

On another matter, H.R. 1016 would require GAO to conduct a study of the adequacy and accuracy of the budget projections made by VA's enrollee health care projection model and report at the same time as the president's budget is submitted in 2011, 2012 and 2013, indicating whether the president's budget request for VA health care funding is consistent with estimated expenditures under the model.

We do not think it is feasible for GAO to conduct a study because of formidable challenges in obtaining, evaluating and reporting detailed information about the model and information concerning the president's budget submissions for VA health funding as they are being developed, as the bill suggests.

Instead, GAO would be pleased to work with members of the committee to develop a request for that work in a timely manner that would inform congressional deliberations over VA's budget and address issues of particular relevance and interest to the committee at that time.

Mr. Chairman, that concludes my remarks. We'll be happy to answer any questions that you or the members have.

REP. FILNER: We thank you so much.

We are in the process of three votes. We'll recess for 25 minutes and make those votes and return as quickly as we can. Thank you. (Sounds gavel.)

(Recess.)

REP. FILNER: (Sounds gavel.) I apologize for the recess. Of course, we don't have control over when the votes are. I thank you. I thank all of you on this panel.

Just to make a few comments and anybody can respond, if they want. Number one, it seems to me that to use the argument of a bad model against forward funding is not -- it's not meaningful. If the formula is bad, it's a bad formula and you deal with it. If we define the formula as being okay for two years, then your formula is okay. If the formula is bad and doesn't even cover the first year, why is that any different than the -- it just makes it, you know, that much less uncertain. So I don't think -- if we have a bad model we've got to correct the model and not argue that against advanced funding, I think.

Secondly, I'm not sure where the line in any of your testimony is between short term and long term. That is, why not appropriate a month in advance because we don't know what -- two months out or a day in advance or an hour in advance? I mean, why do we -- don't have hourly funding or -- because the model loses its certainty. So where in that spectrum or in that spectrum does it become completely unhelpful?

And third, just as a policy issue it seems to me that we have to balance if there is uncertainty in the model against uncertainty in the funding in the current process. Uncertainty in the model we can correct as we go along. Uncertainty in the process you can't. I mean, if you're six months late you're six months late and nothing can make up for that. So as a policy issue I think we have to make those balances.

If anybody wants to comment on any of those points I'll be happy to --

MS. HARRIS: Thank you. I'd like to start by saying I think we all see -- I speak for myself, but I think in general there is a disconnect between the advanced appropriation issue and the delayed appropriation and the budgeting tools that the VA uses in formulating its budget. But I think what's important is that good budgeting tools are important under any circumstance and incrementally more important the farther out the appropriation is.

I don't have a figure for you at what time the short run becomes the long run. If the model is used in a stable policy environment, that short run could last three to five years or even longer. If there is a dynamic, unstable policy environment the long run could be right now, particularly if you think that the current VA budget isn't adequate to meet demand for care.

REP. FILNER: But they are separate issues. I mean --

MS. HARRIS: I think under any circumstance you might want to improve the --

REP. FILNER: The model.

MS. HARRIS: -- robustness of the model.

REP. FILNER: Any other comments on that -- any of that?

MS. IRVING: Mr. Chairman, I think I would say they are separable but not unrelated issues, which I think was your point.

I think some of the disconnect in the conversation is a little bit is what is the presumption about the amount, about what advanced funding represents. That is, some of the conversation seemed to imply that it was rather like going to biannual budgeting as the state of Maine does whereas that you would in effect in the FY 2010 process appropriate a full FY 2010 appropriation and then advance-appropriate the full FY 2011, a full year under the same structure that Congress provided.

In that case, I think the longer lead time between the preparation of the budgets submitted and the effective date of that budget becomes a bigger issue. If on the other hand the presumption is that this is more like a down payment, which the CR is a down payment -- that is, it's -- if it's sort of like we're going to advance-appropriate some money in case -- you know, just to "alleve" concern since the agencies have not in fact had a funding gap, then the issue of the uncertainty of the model may be much less important. I mean, it's still important in the way you described in terms of for one year, but the lead-time issue becomes different.

So I think the question of sort of what is the plan and what is the intent about sort of the share and the scope of the advanced appropriation becomes very critical for the importance of the uncertainty of the model, for the flexibility in the budget debate for the next year, and for all of those kinds of issues. And that's something that only Congress can decide.

REP. FILNER: Thank you.

Mr. Michaud, any questions?

Mr. Snyder?

REP. VIC SNYDER (D-AR): To our GAO witnesses, the H.R. 1016, you made a comment in your written statement I think that you do not think you comply with one of the requirements of the bill that GAO does a study on the ability of the accuracy of the budget projections. Would you comment on that, why you don't think that's -- you all would not be able to comply with that?

MR. WILLIAMSON: Yes. Two points to really consider there. One is that H.R. 1016 contemplates that information on VA's budget -- health care budget would be available to us at the time that budget is being developed. And typically OMB and the executive agencies have resisted giving us that kind of information, especially while the budget is undergoing development. So it would require extensive and lengthy negotiations with OMB and the executive agencies to get that. That's the first point.

The other point relates to the enormity of that study and what it would involve. As others -- my colleagues have discussed, that is a very complex tool that has been developed and maintained by Milliman Incorporated. And it contains -- output from three separate sub- models are used as part of that. It contains literally hundreds of data points, calculations, assumptions. And to do that and deal with that would require very much considerable resources. So for those two reasons we just don't think it's feasible.

I think, though, there are some acceptable alternatives. We have in the past looked at particular critical assumptions and cost drivers that go into the model, and we can still do that. We could also -- and we've used this in the past, something that's much more doable -- we can look back at what happened versus what was enacted and use, you know, the reasons -- if there was any gaps that exist, whatever those reasons are we can then apply to making improvements to either the model or the future budget process. But that's much more feasible than the mandate currently states.

REP. FILNER: Thank you.

Mr. Buyer.

REP. BUYER: I'd like to thank CRS for your report. And I'd also like for you to help clarify what I think are some use of clumsy language. The reason I choose the word clumsy language is that many terms are being used interchangeably among my comrades back in Indiana. So if you could please help explain and lay for the record the difference between an advanced appropriation, forward funding and advanced funding.

What are those -- what are the true differences between them as a finance model?

MR. PANANGALA: Thank you, Ranking Member Buyer, for that question. Let me just start out by saying I'm not an expert in the budget process, but I just reiterate some of the things that I have highlighted in the thing, and I guess others in the panel may want to jump in and provide some examples as well.

An advanced appropriation is an appropriation of new budget authority. That is authority provided by federal law for outlays for the agencies -- (inaudible) -- to outlays that becomes available one or more fiscal years beyond the fiscal year for which the appropriation act was passed. So, for example, if you take the following language in the appropriations bill for 2010 it would provide an advanced appropriation for fiscal 2011 for medical services and let's assume 30.8 billion --

REP. BUYER: I only have a limited amount of time.

MR. PANANGALA: That would be it.

REP. BUYER: So just give me the definitions without the --

MR. PANANGALA: And advanced funding is a budget authority that you provide in an appropriation act to obligate or to disburse funds from a succeeding year's appropriation. And a forward funding is a budget authority that is made an obligation beginning in the last quarter of the fiscal year for financing ongoing activities, especially for grant programs and education. So that's sort of the general definition of differences between the three.

REP. BUYER: All right. Thank you.

MS. IRVING: Mr. Buyer --

REP. BUYER: One of the questions I have is to the GAO. Is there a constitutional question? If the president's prerogative is to propose and to execute and GAO then is an arm of the Congress, as proposed in this legislation it's asking GAO to make a judgment. Are there any -- and you're an extension arm of the Congress and it's laying responsibility right in your lap. Is there a constitutional question?

MS. IRVING: Mr. Buyer, I think that I would probably wish I had counsel with me. But in general, we would assert that there are not limits to our ability to access that data. We often through comity reach agreements with the executive branch on behalf of the Congress of what makes sense for us to do and whatnot.

I'd also point out that one of the things, as my colleague mentioned about the mandate, is you lock into law the scope of the study, whereas suppose you wanted to focus on something in particular. That doesn't answer your particular question.

REP. BUYER: You are auditors.

MS. IRVING: Yes, sir.

REP. BUYER: So as auditors you look backwards, right?

MS. IRVING: Well --

REP. BUYER: And this is asking you to look forward. So do you have the expertise to be able to do what is asked in this bill?

MS. IRVING: I will answer part of this question and then defer to Mr. Williamson. We do a great deal of forward-looking work. I mean, in fact, my area where we do the long-term budget simulations and I work -- and work with our programmatic colleagues and what we think is likely -- something is likely to do.

As to the programmatic expertise to do this particular kind of work I --

MR. WILLIAMSON: Well, typically we look backwards, and we also do real-time auditing where we're in there as things are happening. But again, when you have a very sensitive situation like we have here where the budget is being developed at the same time that we would be in there, it's very unusual. Again, it's -- OMB and executive agencies resist that kind of thing, particularly as it's ongoing.

REP. BUYER: Well, that's why I asked is there a constitutional question here about your involvement in the secretary and the president's business.

MS. IRVING: Well, one of the interesting things --

REP. BUYER: Wait -- hold on.

MS. IRVING: Oh, I'm sorry.

REP. BUYER: Hold on.

MR. WILLIAMSON: I don't know if it's a constitutional question. It's a very practical question. We think -- we believe we have access to that data. But, you know, so in that regard it's probably not a constitutional question. But I'm not a legal --

REP. BUYER: Will you have your counsel provide input to us on the separation of powers issue?

MR. WILLIAMSON: Sure.

REP. BUYER: Thank you. I yield back.

REP. FILNER: Thank you, Mr. Buyer.

We thank you for your expertise and your thoughtful testimony. And we'll excuse panel two and call the secretary of the VA.

Thank you, Mr. Secretary. You are accompanied by Patricia Vandenberg, the assistant deputy undersecretary for health for policy and planning with the VHA. We thank you for being here. We thank you for listening to the earlier testimony. I know you agree with me that that informs your ability to testify and makes this a more meaningful dialogue.

You are recognized, sir.

MR. SHINSEKI: Thank you, Mr. Chairman. Chairman Filner, Ranking Member Buyer and distinguished members of the committee, I'm pleased to be joined today, and the chairman has already introduced her, but let me do that again. Patricia Vandenberg is our assistant deputy undersecretary for health at our Veterans Health Administration. What that really means is that she is the person I rely on to have oversight over this modeling process that we've been discussing this morning.

We thank you for this opportunity to discuss advance appropriations and the requirement to project VA future budgetary needs. It's been a very busy three months at VA for this new secretary as we have begun laying the groundwork for fulfilling the president's charter to us of establishing a vision for transforming this VA into a 21st century organization.

Earlier this month the president announced a joint VA-DOD initiative requiring both of us to work together to create a virtual lifetime electronic record for members of the armed forces, one that will stay with them throughout their service in uniform and to the date that the VA lays them to rest.

In making that announcement the president repeated his concern that caring for veterans receive should never be hindered by budget delays. I share the president's concern as well as his support for advance appropriations as a way to ensure uninterrupted care. In particular, we support the overall intent that's covered in H.R. 1016 and are committed to working with the Congress to provide veterans with care they expect and deserve.

Having lived with continuing resolutions in another life, I know how disruptive they can be, especially in the case of health care and other services and benefits provided to veterans. Implementing an advance appropriations mechanism is not without challenges. However, VA has had considerable success recently in predicting future needs using its enrollee health care projection model developed in 1998 with the help of Milliman Incorporated, the largest health care actuarial practice in this country.

Over the last 11 years, VA and Milliman have continued to improve the model with periodic updates. We have developed a strong partnership that's resulted in a credible -- my opinion -- credible modeling tool. VA has guided the overall development of the model and ensures that it meets the needs of its stakeholders. VA program staff provide expertise on the unique needs of veterans -- that resides within the VA, that knowledge -- patterns of practice in the VA health care system, and how the system is expected to evolve over the next 20 years. Milliman brings specialized actuarial expertise, access to extensive amounts of non-VA health care data, and excellent research to the overall modeling effort. And we think that this marriage between both our historical database and what they bring to the table creates a very strong and robust model.

This partnership with Milliman has enabled VA to develop a robust model that produces thorough and accurate projections of demand for health services for enrolled veterans. In the last five fiscal years the average variance between the model's projection of enrollees and the actual enrollee population was .54 percent under forecast. In other words, slightly more veterans, half of 1 percent, enrolled than were projected to do so. For the same five years, the average variance between the VA model's projection of veteran patients and actual patients was 1.7 percent over forecast. In other words, slightly fewer patients were actually treated than were projected.

The VA model is used to develop most but not all of VA's health care budget, about 84 percent. Sixteen percent of our health care budget is developed through alternative models and simulations -- alternative models and estimations. All such models and estimations are based on assumptions about the future. Any advanced appropriations mechanism should provide some flexibility for budgetary adjustments in a following year, a year two, for example, in order to account for factors that could not have been foreseen by year one assumptions.

Finally, close consultation between the administration, the Congress, the VSOs and other stakeholders, some who appeared on the panels here this morning, is necessary to make advance appropriations work. I believe today's hearing recognizes that necessity. I value the opinions of others who work with us in ensuring that our modeling process is first rate. And I welcome the testimony of today's previous panels. I look forward to hearing the committee's views on advance appropriations. And I am prepared to answer your questions. Thank you, Mr. Chairman.

REP. FILNER: Thank you, Mr. Secretary. And again we appreciate your first 100 days. You've had a certain, I guess, handicap in that only now I think two of your appointees have been confirmed by the Senate.

MR. SHINSEKI: I have.

REP. FILNER: And there's, what, another nine or 10 to go? So we look forward to your being fully staffed up and taking full reins of the job. We appreciate what you've done so far.

Mr. Michaud.

REP. MICHAUD: Thank you very much, Mr. Chairman.

I too want to thank you, Mr. Secretary, for all that you have done so far and all that you are planning on doing to make sure that our veterans receive the adequate, timely health care and have access to that health care as well, especially in the rural areas.

I'm also very appreciative of the fact that you and the administration's looking forward to working with Congress for some type of advanced funding mechanism. H.R. 1016 might not be perfect but I think it's a good basis for us to move forward. I think all too often people are skeptical of change and willing to think outside the box and do things differently. I am convinced, however, having talked to former VA officials that have to deal with budgets, budgets has been delayed two, three, four, five, six months, that we can do things differently and we can improve on the process that is currently there.

And at the same time, with that improvement, I think we actually can save money. All too often if budgets are not approved come October 1st it forces the VA, having talked to former VA officials, to make decisions that might not be cost-effective decisions that they will have to make just to live within the budget continuing resolution that's provided to them from Congress.

So I just want to let you know that, Mr. Secretary, that I will work with you and the administration to move forward and make changes within H.R. 1016 if changes have to be made, which I think they probably should. And I would just ask you, is there anything in particular under H.R. 1016 that's causing you some problems or how we might be able to address it a little differently than what's currently presented in that piece of legislation?

MR. SHINSEKI: Thank you for this opportunity. However the final legislation is worded, I would hope that in a follow-on year there is a mechanism of some kind that would allow us -- all of us -- to be able to adjust to the unforeseen, which, you know, whether it's an outbreak of swine flu as we're currently contending with, there will be the unexpected and the unknowns, and so flexibility to accommodate that and even flexibility to accommodate misreads by us in how we put the assumptions in. Now, we've gotten a lot better at that. We've very much narrowed those issues and over time performance. I would say that that would be one interest.

Another one would be to work closely with you all to ensure that when we talk about those three categories that would fall under advanced appropriations -- medical services, medical support and compliance, medical facilities -- as was indicated earlier here in some discussion that any more IT is very much integrated into those activities and that we should be sure that that is also how we parse that to ensure that that's included so that our plans to provide services -- health care services and CBOCs or open new CBOCs -- not hindered by inability to have that kind of flexibility.

REP. MICHAUD: Have you looked or have you talked to former VA employees or existing VA employees who have been there for a length of time as far as how, you know, more cost-effective this might be for advanced funding? Have you had any discussions internally as of yet about that?

MR. SHINSEKI: I'm not aware that we've had those discussions, but to be sure, those discussions will take place. We're beginning now to look at our ability to look beyond the first year and see just how accurate our models are.

This model looks out 20 years, and all of us would say 20 years probably not worth looking at. Year one has been the focus. We looked at year two and looked backwards to compare how the year two projections compare with what would have been the model's suggestion. The correlation is pretty close. So I defer again to RAND and GAO's stated comfort in the short term for the models being useful.

REP. MICHAUD: Okay. Well, once again, thank you very much, Mr. Secretary. And I also want to thank all the employees that work at VA. You do a phenomenal job with the resources that you're provided in taking care of our veterans. So thank you and your employees as well.

MR. SHINSEKI: Thank you. Thank you very much.

REP. MICHAUD: I yield back, Mr. Chairman.

REP. FILNER: Mr. Walz.

REP. WALZ: Thank you, Mr. Chairman.

Mr. Secretary, again, thank you for being here. And more importantly, thank you for all of your years of service. And I'm always reminded and folks have told me to tell you this when I see you, thank your wife for letting you come back again to do this. I know how important that is.

Ms. Vandenberg, thank you for choosing to serve our veterans. It's truly important.

A couple things: First of all, the announcement on the 9th of April was incredibly heartening for many of us, especially that I think we're looking at the full spectrum of how to make the system more efficient, how to come together to get this right. The seamless transition and uniform enrollment is another big piece we'll be working simultaneously on. But I really do get it -- believe it's going to get us there.

I think it's important that we do remember here and we see some of the issues coming up and we hear support for this or we hear some of the legitimate concerns that we want to air. This is not a VA issue and a weakness. It's not our veterans demanding something above and beyond. It's Congress's failure to get it done by the 1st of October. That's where all of the problems start. And I wish there were another mechanism.

I've suggested that if our approps aren't done by 1 October they start reducing pay daily and see how quickly things get done. It's the nature of a deliberative body to wait until the last minute, but that last minute does have huge repercussions. So I wish there were a better way to be able to do this. I sure do not want to inhibit in any way your flexibility, Mr. Secretary, and your staff's flexibility. That is absolutely paramount. And one of the things you're most known for is your frankness and directness on this.

Are we missing anything here that's going to be a problem? I know the modeling issue got in, and all we can count on is exactly what you said. It was a question I was going to ask where RAND says the model is somewhat uncertain. All are to a certain degree. Are we missing something here that could cause us problems on this from your perspective that you want us to really, really keep in mind? I know it's kind of been asked before, but any frank assessment? Because our goal here is to make this work.

MR. SHINSEKI: I would just remind that this model is intended to run based on assumptions that we input into it and run clean, and then it produces outcomes that we use to inform the budgeting process. So we're talking about a modeling process that is expected to inform the budgeting process. And my interest is keeping this process essentially designed to do what it's supposed to do so that with that information now we can decide how much risk we want to take in any given budget or sets of years of budgets.

If this process isn't allowed to do that, we will never know where risk resides in this. We'll take it good faith that these are good numbers and we won't know until it's too late. So my hope is that in working with the Congress and working with the VSOs and other people who do modeling is to have an open and transparent understanding of the process. But let the process run, and then we can decide to do what it is we need to do with the results. And hopefully it will inform a very good budgeting process where decisions can be made about how much risk to take. We don't want to take risk in the modeling process. That ought to be allowed to be a clean run.

If I have a concern it's that we miss this opportunity to separate those two pieces here. And I would ask for, you know, just the opportunity to be able to express even stronger feelings about why that's important. And we in VA will commit to sharing as much visibility as we can of this process so other people can develop the same trust and confidence in this model as we have and I have in the last three months in sitting with the experts who are taking me through it.

I think those would be the two issues I would offer. One is looking for help in ensuring that this process is allowed to run. We can discuss the assumptions and why they go in and talk about it, but once run it can then be allowed to inform the budgeting process. And then we'll make as much transparency as we can.

A certain piece of this is proprietary to Milliman. So, you know, they own it. But all the inputs and the outputs we can look at very closely.

REP. WALZ: Well, I truly appreciate it. And I guess our bottom line is, and it may be too early to tell, the intent of this is plain and simple to give you another tool to provide quality care and hopefully in an efficient manner. And that's -- anything in this process that's leading us away from that goal we need to be aware of and switch directions. So I very much appreciate it.

I yield back, Mr. Chairman.

REP. FILNER: Thank you, Mr. Walz.

But I just want to remind us all as we talk about modeling and all this expertise, you know, that several years ago they gave us a budget that did not assume a war was going on. That to me says hey -- (laughs) -- you know, all this stuff about modeling you can talk about until whatever, but if you don't have any common sense it doesn't make any difference anyway.

Mr. Hall.

REP. JOHN HALL (D-NY): Thank you, Mr. Chairman, Ranking Member.

Mr. Secretary, welcome back. It's good to see you. I bring you greetings from Sheriff Don Smith from Putnam County, New York, and his wife who say -- send their best. And thank you again for your service to our country again and again.

Some of the VSOs we've heard from have worried that in the past the VA has had a pattern of hording funds until the end of the fiscal year and then spending them needlessly or inefficiently because they know if they don't spend it the money won't be available in the next budget year. That's something I saw when I served in local and county government that different agencies would do.

If we do advance appropriations for VA what can you do or what can we do to prevent that from happening?

MR. SHINSEKI: Well, part of the process here in response to Congressman Walz's question -- last question -- what I am trying to assure or what I'm trying to develop is confidence in the model. What I'd also like to do is work with you to develop your confidence in me in making the right calls. And the example you've cited would be something I would look at.

In the last 12 weeks we have cancelled or deferred about $18 million worth of things we didn't have to do. And that's just business the way I'm used to doing it, and I will take on this issue that you've mentioned. I don't have particulars on it. I don't doubt that some of that goes on. But I'll get to the bottom of it.

REP. HALL: I'm sure you'll be watching it, sir. And I also wanted to mention that we had a hearing in the Subcommittee on Disability Assistance on my bill H.R. 952, the Combat PTSD Act. And in the course of that hearing Director Mayes remarked that you and the president had asked him and the department to try to move in a regulatory fashion to provide some of the same goals -- to achieve the same goals that this legislation would achieve, that being a presumed stressor for PTSD if a serviceman or woman comes back from Iraq or Afghanistan or whatever conflict and is diagnosed. They can't just say they have it but they have to actually have the diagnosis of the symptoms that make up post-traumatic stress.

And in the course of that hearing it was related by some VSO reps as well as VA witnesses that in the early '80s a similar decision was made regarding Agent Orange that Vietnam-era exposure to Agent Orange was initially dealt with on a one-case-at-a-time basis trying to link the individual veteran to an exposure, being sprayed in a field or having a barrel break open in a truck that one was driving or something that you could draw a direct line to. And it turned out to be inefficient and caused more person hours to be expended and at the same time delay the claim from being expedited. So as a result, as you know, there has been a blanket presumption that if you served in Vietnam and you come down later with prostate disease or with diabetes or certain illnesses that are known to be caused by Agent Orange that that automatically will be presumed to be caused by your service there.

There seems to be somewhat of a parallel between that and the current conflicts and PTSD. And I was just curious in terms of budgeting whether you thought that there was something to that and whether you would look into it as regards to either a regulatory fix or the bill that I'm talking about.

MR. SHINSEKI: Mr. Hall, I'm part of the Vietnam generation. I do know the history of Agent Orange, 40 years. I also know the history of Gulf War illness, 20 years. We are where we are. And my interest for this current generation of young Americans is to understand whether we have to follow the same scientific method that we followed in both of these examples for the last several decades, which is collection of data, the writing of professional papers, sharing opinions and at some point decisions get to be made about individual cases or individual disabilities.

The scientific process is important. It's a part and parcel of a lot of things we do. And there is great faith in its veracity.

But I would say in my experience that it does not favor the veteran because we come to those conclusions over time after we've arrived at convincing evidence that there is a connection. And I think, you know, part of my responsibility here is to look at whether there's another way of doing this.

The veterans about three years, you know, into Vietnam gathered around reunion tables as their units gathered and they all compared notes. And they could figure out something wasn't right. They came to those conclusions without that scientific collection, but they had the evidence that was important to them. And that is they didn't grow up in any place together except they served in the same unit in the same location and, you know, the conclusions were -- so I think, you know, we have a responsibility to look at the process that we've lived with and ask whether that's the right -- I've asked whether that's the right process so that some future secretary isn't sitting here 20 or 40 years after Afghanistan and Iraq and wrestling the same issues the way I am wrestling today to decide whether Parkinson's is, you know, connected or isn't. On behalf of the veteran, at least I'm going to look and see whether there's a better process.

REP. HALL: Thank you, Mr. Secretary. And your seriousness and intelligence that you bring to bear on this is certainly appreciated.

And I've run out of time. I yield back. Thank you.

REP. FILNER: I too want to thank you for that heartfelt answer, Mr. Secretary.

Mr. Snyder.

REP. SNYDER: Thank you, Mr. Secretary, for being here. I'd just make a comment. I appreciate your thoughtfulness in being here today.

And in your written statement my only comment is that this whole issue is what I call the Moses gold tablets. Nobody put on gold tablets that tells us what's the right way to make these kinds of estimations. These are human-made formulas and estimates with all the frailties that we human beings have. And I think that all of us need to enter into this with a certain amount of humility as that the task of trying to estimate what's going to happen as in years as, you know, right down the hall we're just beginning a hearing for all the members of the House on swine flu with several of the secretaries there. And, you know, okay, what does that potentially do to health care estimates? Well, you can't predict those kinds of things.

But I appreciate your attentiveness to this issue and appreciate your being here today. Thank you.

REP. FILNER: Thank you, Mr. Snyder.

Mr. Buyer.

REP. BUYER: Well, I think, Mr. Secretary, that the sincerity of the statement by Dr. Snyder relies upon his experience that he's done dealing with the military health delivery system, your experience as a commander and chief of staff of the Army as you work with the secretary of the Army. Every time we do a supplemental, health care is in that supplemental. And it's where I learned about the modeling and trying to do the predictability and all of the inputs.

And so even if we do -- now, let's take ourselves forward. Even if we do this advanced appropriation, as I listened to the testimony from the second panel, the testimony -- the lady said the '09 baseline would form the 2013 budget process. So before we go and mock the '05 budget that was passed by Congress in '04 that utilized inputs out of '01 and saying well, my gosh, you used inputs that didn't include the war, that in fact was true, but no differently than if we were to do an advanced appropriation, we'd go into that process the inputs aren't changing.

So what I embrace most is Dr. Snyder's comment here of, you know, we are all human. We make the errors, and yet there has to be some latitude here with the secretary in the judgments and monies that they lay down.

Now, over the years what I have really paid attention to is the money that -- the bridge money that goes from one year to the next. How much monies have been carried over? And it's what the departments sort of prepare themselves for.

So if we're going to think outside the box, I look at this and say if we're worried about the inputs and in fact we're going to use a model that is -- provides excellent predictability for the short term, but if we're asking to go four years out that we're stressing the model, then perhaps let's not lock ourselves in. Perhaps maybe what we should be doing here is creating some type of a bridge fund or a reserve fund and fund it with $10 billion or pick a number, and we give the discretion to the secretary that he can move it among accounts, rather than locking us in to specific appropriation accounts whereby he then cannot have flexibility. Take a Katrina that wipes out the -- you know, a medical facility or some tornado that wipes out facilities or numbers of facilities, and yet he doesn't have the flexibility to go get extra monies.

You know, Mr. (Michaud ?), I respect you a lot. And so you've used this to your budgeting process. I'm just -- let me throw that out to you, Mr. Secretary. If we were to define an advanced appropriation by really giving you an X dollar amount, say a $10 billion or a $15 billion as a bridge amount that is carried from every year so that we address the concerns that the VSOs have always brought to us that the VISNs out there as they put those dollars out to the medical centers that it's okay to do the hires, it's okay to function. Let me throw that out as an idea to you.

MR. SHINSEKI: I wouldn't have any idea what a good number would be, but if that were not the issue of the discussion I think, you know, that would be an option that would be worth part of this, you know, deliberation. I'm not sure exactly -- I think, Mr. Buyer, you know, the appropriations we get don't come to the secretary directly; they are into three administrations. And so inherently there is already some constraint. And I would have to think about how this bridging mechanism might work.

REP. BUYER: As you consider that, because I would give it -- I would send the bridge fund to you as discretionary authority over the three administrations. And if we're going to talk about the reorganization, as you know, I've been asking and working with Mr. Michaud and Dr. Boozman about creating a fourth administration. And I know you had some ideas on reorganizing.

I have advocated over the years that a secretary should have increased political appointments. And in that discussion, if you believe that we should have some increased political appointments, please let us know and I'll be as helpful as I can to make sure that you have the ability to implement. And I think that's what you should need, especially also with regard to procurement. And I'm quite certain you have some ideas and thoughts on that.

With regard to advanced appropriation, are we going to see any legislative proposal now that the president has said he supports it in your 2010 budget that you're sending to us? And then comment on reorganization.

MR. SHINSEKI: Yeah. This is the piece that I'd like to, you know, come and work with this committee and the Congress and ensure that implementation makes sense, that we get it right and that there's -- the veterans are well served. And so however this is done, I'd like to work that with members of this committee.

REP. BUYER: Could you comment on proposed reorganization, please?

MR. SHINSEKI: One of the issues I have right now is we do contracting in multiple locations. I don't have an acquisition oversight; assistant secretary does that exclusively. And that is something I would like to have an opportunity to discuss with the Congress and whether or not that's possible and how that would be structured and what authorities that individual would have, and in concert with any other proposals for reorganization.

REP. BUYER: Very good. Thank you.

REP. FILNER: Again, thank you. Thank you, Mr. Secretary. Again, we appreciate your being here with us.

I would just -- I don't know if you got a copy of the statement that was entered into the record by the VSOs on the former officials who have endorsed advanced funding.

Do you have that document?

MR. SHINSEKI: I don't have it here.

REP. FILNER: Make sure --

MR. SHINSEKI: I have seen it. I just read it.

REP. FILNER: Okay. I just think it's pretty impressive when I look at a couple former secretaries, both in -- one in the Clinton, one in the Bush administration, deputy secretaries under both, every undersecretary for health, you know, since Clinton and into the Bush administration, including, you know, many VISN directors and hospital directors. I think that's a pretty powerful kind of endorsement if some of those really high officials who have dealt with this year after year after year see it as a worthwhile model.

And again, for me as I listen to the discussion today, it comes down I think to a policy decision of do you -- do you go with some of the uncertainty of some of the model, which as you pointed out, is not very high at least from your inspection so far, or with the uncertainty of the expenditure to your whole system? The first one is correctable, so I would go that we live with that as opposed to living with four or five or six months out.

And I know both you and the president are hopeful that all of the budgets are passed on time, especially the veterans' budget. But the system does not always work the way we all want it. As someone pointed out today -- I think one of the witnesses -- the House can pass something. The Senate could pass something. We could agree on it. The president could agree on it. And yet it doesn't come out of the Congress for other reasons that have nothing to do either with veterans or with the budget of your agency. So factors outside yours or my control affect that and leads to the uncertainty that we have heard described today.

So I'm convinced that right now that whatever uncertainty there is in the model, that uncertainty is present in this year's budget. I mean, the swine flu thing is not, you know, because we have an advanced appropriation, the swine flu is because we didn't know it was coming. So it's this year's. And if, for example, for some reason tens of thousands of veterans end up in the hospital we're going to have to do something about it, whether this was an advanced appropriation or this year's appropriation. So I think we can live with those uncertainties.

Mr. Secretary, you have been with us all day today. I appreciate it, appreciate your listening to the other testimony, and I'll give you the last word for anything you would like to comment on.

MR. SHINSEKI: Just to -- thank you, Mr. Chairman. Just to reiterate, I'm here to, you know, make very clear that the president and I support the requirement for advanced appropriations and that I look forward to working with the Congress on ensuring that we implement this in a way that veterans begin to benefit from this in the short term. Thank you, Mr. Chairman.

REP. FILNER: And again, thank you, Mr. Secretary. And we look forward to working with you on that. (Sounds gavel.) This hearing is adjourned.


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