Congress rushed in late June to pass a $1.5 billion emergency supplemental bill to eliminate a 2005 funding shortfall for the Department of Veterans Affairs health care system. VA officials had been slow to reveal the problem.

Rep. Steve Buyer (R-Ind.), chairman of the House Veterans’ Affairs Committee, grilled a senior VA official at a June 23 hearing on the department’s cost-forecasting model and learned for the first time that VA health care programs were short this year by at least $1 billion.

Jonathan B. Perlin, VA’s undersecretary for health, admitted that the VA would come up short in 2005.

When asked earlier this year, VA officials had told lawmakers the 2005 budget was adequate.

At least one lawmaker, Democrat Patty Murray (Wash.), was skeptical. Murray, who serves on the VA, budget, and appropriations committees, tried to insert extra money for the VA into the war on terror emergency spending bill. The Administration said the funding was not necessary.

Nicholson on hot seat for funding gap. (AP photo by Corrado Giambalvo)

Republicans and Democrats alike expressed dismay over the VA revelation.

Murray called news of the shortfall “appalling but not surprising.” At a press conference following the session, Buyer and Sen. Larry Craig (R-Idaho), his counterpart in the Senate, promised that Congress would close the funding gap.

By the time Congress learned of the funding shortfall, it already had approved a $71 billion 2006 VA budget, which is $450 million higher than the President requested and $1.2 billion above the 2005 VA budget.

Behind the Shortfall

Committees in both the House and Senate on June 28 held emergency hearings to explore what happened and how VA proposed to handle the shortfall.

VA Secretary R. James Nicholson testified that the primary culprit was the agency’s forecasting model, which works from data that is three years old. He said federal agencies that use “actuarial modeling to project resource requirements two-and-one-half to three years hence push the performance envelope.” Most private companies work with models using one-year-old data.

Nicholson said a secondary problem was the VA estimate that the agency would see fewer than 24,000 veterans of the war on terror using VA health care in 2005. The new estimate is around 103,000, leaving the VA short by about $273 million—or 28 percent of the total shortfall.

The VA’s initial plan to cover the shortfall would have used $375 million earmarked for 2006 and deferred $600 million in capital improvements slated for 2005. That would have pushed the problem forward, shorting the 2006 budget, which now is suspect as well.

Modest Steps

In early June, before the funding shortfall came to light, Craig touted Nicholson’s support for the Veterans Health Care Act of 2005 (S 1182). The act offers numerous enhancements. It would:

• Eliminate co-payments for hospice care and for long-term care of former prisoners of war.
• Allow the VA to provide hospital care for newborns of female veterans.
• Grant authority to the VA to pay for emergency treatment for veterans who must use non-VA hospitals.
• Increase funding for groups that give shelter to homeless veterans.
• Allow the VA to provide licensed family counseling sessions for veterans and improve VA mental health care outreach programs to the nation’s National Guard troops.
• Enable the VA to conduct cost-comparison studies within its health care system to determine the most efficient means of delivering services.

Craig noted during a late May hearing that veterans still must wait almost six months, on average, to have their initial claims either approved or denied. The VA backlog in claims stands at more than 340,000.

More than 12 percent of claims denied are appealed. The appeal process itself generates a more extensive VA review process that can take, on average, three years to complete.

Craig did say, though, that benefits paid to veterans and their survivors this year will total more than $32 billion, an increase of more than 50 percent since 2000.

Defense Bill Delayed

Senate Majority Leader Bill Frist (R-Tenn.) has decided to delay until mid-July, and possibly until September, full Senate consideration of the 2006 defense authorization bill.

The House passed its defense authorization bill (HR 1815) in May. That same month, the Senate Armed Services Committee marked up its version (S 1042). Typically, a majority leader will refer the authorization bill to the floor to begin debate and vote on amendments, followed by full Senate passage and scheduling of a House-Senate conference to iron out differences between the two versions.

The delay froze a queue of amendments important to military reservists and retirees.

Republican leaders faced the prospect of Senators from states slated to lose military installations using the defense bill to argue for their bases to remain open, in hopes of influencing the base closure commission recommendations. And lawmakers critical of ongoing operations in Iraq were expected to use hours of debate on defense issues to underscore their viewpoints.

What’s at Stake

Four planned amendments to the Senate’s 2006 defense authorization bill are priorities for military associations and beneficiary groups. Here’s what the amendments would do:

• Expand Tricare for Reservists. Sen. Lindsey Graham (R-S.C.), chairman of the armed services subcommittee on personnel, will introduce an amendment to provide a premium-based Tri­care Standard program to drilling National Guard or Reserve members and their families who need health insurance.

“He’s committed to it,” said a Senate aide, who dismissed the notion that Graham might shelve his amendment at the urging of defense officials who have complained openly in recent months about soaring military health care costs. The aide emphasized that Graham had made the amendment “his first priority.”

A similar amendment inserted into the House defense authorization bill by Rep. Gene Taylor (D-Miss.) was pulled, ostensibly because it violated a budget law that requires any increase in entitlement spending to be offset elsewhere.

Under Taylor’s amendment, drilling reservists would be eligible for Tricare Standard, the military’s traditional fee-for-service health insurance, if they paid monthly premiums of $75 for member-only coverage or $233 for family. The plan would cost the government $3.85 billion over five years.

Congress last year approved Tricare Reserve Select (TRS), a scaled down version of Standard, but opened it only to reservists deactivated from post-9/11 deployments who agreed to remain in drill status during the period of TRS coverage. Graham and Taylor argue that TRS fails to properly reward reserve component members and their families for the burden they now carry for the nation’s defense.

Whether Armed Services Committee chairman Warner goes along will be key to approving this amendment. So far, said an aide, “Warner likes the idea of tying medical benefits to mobilization” as required under TRS.

“Graham doesn’t dispute that [logic], but he ties it to readiness and reliance on the reserves,” said the staffer.

Expand death benefits eligibility. Sens. John Kerry (D-Mass.) and Carl Levin (D-Mich.), ranking Democrat on the Armed Services Committee, will press to extend the $238,000 retroactive increase in military death benefits—which Congress approved with a provision in the 2005 wartime supplemental funding bill for combat-related deaths only—to all active duty deaths since Oct. 7, 2001, the start of Operation Enduring Freedom in Afghanistan.

Kerry presses to expand death benefit. (AP photo by Ted. S. Warren)

Helping that effort are warnings from the Joint Chiefs of Staff about a negative effect on morale from having two levels of death benefits—one for combat-related deaths and lesser payments for other active duty deaths.

• End DIC/SBP offset. Sen. Bill Nelson (D-Fla.) will offer as an amendment a bill (S 185) to eliminate the drop in Survivor Benefit Plan (SBP) annuities that occurs when surviving spouses receive VA Dependency and Indemnity Compensation.

DIC is paid to surviving spouses if service members die on active duty, veterans die of service-related conditions, or certain veterans die who were being paid 100 percent VA disability compensation. Under current law, if the surviving spouse of a retired member is also covered by SBP, that monthly payment is reduced dollar-for-dollar by tax-free DIC, now set at $993 a month. SBP premiums associated with the lost payments are returned.

The offset currently affects more than 52,000 military widows.

The amendment’s cost—$6 billion over 10 years—and death benefit gains voted earlier this year, dampen prospects for Nelson’s amendment, said a Senate staff member.

“There was force behind the argument if you kept the death gratuity at $12,000 and Servicemembers’ Group Life Insurance at $250,000,” he said. “There was an argument that, well, this particular income stream shouldn’t end and the way to do it is eliminate the offset, so full SBP and DIC can be paid.” However, others cried enough because Congress had “just raised the death gratuity to $100,000 and SGLI by $150,000.”

• Accelerate CR for IU retirees. Sen. Harry Reid (D-Nev.) is expected to offer an amendment to match a House-passed plan that would accelerate phase in of concurrent receipt of military retired pay and VA compensation for 28,000 military retirees drawing 100 percent disability compensation for being rated unemployable (or IU) by the VA. Reid’s measure, like the initiative from Rep. G.K. Butterfield (D-N.C.) that the House approved, would end offset of IU retirees on Oct. 1, 2009, instead of January 2014.

Speculating that Reid’s amendment would pass, the Senate staffer explained that there is “a lot of sympathy” for the IU retirees. He asked, “Who is going to say this group is not deserving?”

Reid may press colleagues to eliminate the entire phase-in schedule for IU retirees or, as he has in the past, propose lifting the entire ban on concurrent receipt to restore full retired pay immediately to any military retiree also receiving disability pay.

Health Savings Accounts

The House Government Reform Committee voted to allow service personnel and federal civilian employees to establish health savings accounts (HSAs) so they can pay any out-of-pocket health care costs, such as Tricare enrollment fees or Federal Employees Health Benefits Program premiums, using tax deferred dollars.

The bill (HR 994), sponsored by Rep. Tom Davis (R-Va.), had attracted 212 co-sponsors by late June.

However, the Armed Services and Ways and Means committees share oversight responsibility for the HSA bill, complicating its passage. Similar legislation in the past failed.