Order Code RL32975
CRS Report for Congress
Received through the CRS Web
Veterans’ Medical Care:
FY2006 Appropriations
Updated August 2, 2005
Sidath Viranga Panangala
Analyst in Social Legislation
Domestic Social Policy Division
Congressional Research Service { The Library of Congress

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Veterans’ Medical Care: FY2006 Appropriations
Summary
The Department of Veterans Affairs (VA) provides benefits to veterans who
meet certain eligibility rules. Benefits to veterans range from disability compensation
and pensions to hospital and medical care. VA provides these benefits to veterans
through three major operating units: the Veterans Health Administration (VHA), the
Veterans Benefits Administration (VBA) and the National Cemetery Administration
(NCA). VHA is primarily a direct service provider of primary care, specialized care,
and related medical and social support services to veterans through an integrated
health care system. Veterans are enrolled in priority groups that determine payments
for service and non-service connected medical conditions.
The President’s budget requested approximately $32.3 billion for VHA for
FY2006. The Administration’s request includes $22 billion for medical services,
$4.5 billion for medical administration, $3.3 billion for medical facilities, $393
million for medical and prosthetic research, and $2.1 billion in collections (copays
and third-party insurance payments).
On May 26, 2005, the House passed H.R. 2528 making appropriations for
Military Quality of Life and Veterans Affairs and Related Agencies for FY2006
(MIL-QUAL appropriations bill). Among other things, H.R. 2528 provides $21
billion for medical services, $4.1 billion for medical administration, $3.3 billion for
medical facilities, and $393 million for medical and prosthetic research. Under H.R.
2528, the total amount appropriated for veterans’ health programs is $31 billion,
including $2.1 billion in collections. On July 21, 2005, the Senate Appropriations
Committee reported its version of H.R. 2528 making appropriations for Military
Construction and Veterans Affairs and Related Agencies for FY2006 (MIL-CON
appropriations bill). This bill would provide a total of $33.5 billion VHA programs.
This is $1.1 billion more than the Administration’s request for FY2006 and $2.5
billion more than the House-passed version of this bill
On June 23, 2005, VA announced a more than $1 billion shortfall from its
FY2005 enacted budget for veterans’ health programs. On July 26, 2005, the
conferees of the Department of the Interior, Environment, and Related Agencies
appropriations bill, 2006 (H.R. 2361, H.Rept. 109-188) provided $1.5 billion in
supplemental appropriations for veterans medical services for FY2005, with
carryover authority for FY2006 as well. The conference report has passed both the
House and Senate and awaits the President’s signature.
In its FY2006 budget submission to Congress, the Administration proposed
several legislative and regulatory changes to increase certain copayments and other
cost-sharing charges for veterans in lower-priority categories. The House and Senate
Committees on Appropriations did not accept any of the Administration’s cost-
sharing proposals for VHA.
This report will be updated as legislative and budgetary activity occurs.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Federal Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Changes in Appropriation Committee Jurisdictions . . . . . . . . . . . . . . . 3
VHA Health Care Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Funding for VHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FY2005 Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FY2006 VHA Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
President’s FY2006 Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
House and Senate Budget Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FY2006 House Appropriations Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FY2005 and FY2006 Budget Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FY2006 Senate Appropriations Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Key Budget Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Changes in Cost-Sharing for Health Services . . . . . . . . . . . . . . . . . . . . . . . 13
Changes in Long-Term Care Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Legislative Proposals to Change the Cost-Sharing Structure . . . . . . . . . . . . . . . 13
Assess an Annual Enrollment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Increase Pharmacy Copayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Impact of the Annual Enrollment Fee
and Increase in Pharmacy Copayments . . . . . . . . . . . . . . . . . . . . 15
Exempt Copayments for Hospice Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Authorize VA to Pay for Emergency Care for Insured Veterans . . . . . . . . . 16
Legislative Proposals to Change Long-Term Care Services . . . . . . . . . . . . . . . . 17
Revise Eligibility Criteria for Long-Term Care and Per-Diem Payments . . 17
Place a One-Year Moratorium on Grants
for State Extended Care Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exempt Former Prisoners of War (POWs)
from Long-Term Care Copayments . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Eliminate Mandatory Long-Term Care Daily Census Requirements . . . . . 19
Appendix 1. Priority Groups and Their Eligibility Criteria . . . . . . . . . . . . . . . . 20
Appendix 2. Veterans’ Payments for Health Care Services . . . . . . . . . . . . . . . . 21
Appendix 3. VHA’s New Account Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Medical Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Medical Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Medical and Prosthetic Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Medical Care Collections Fund (MCCF) . . . . . . . . . . . . . . . . . . . . . . . 23

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List of Tables
Table 1. VHA Appropriations FY2004,FY2005, and FY2006 Request, and Amounts
Recommended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

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Veterans’ Medical Care:
FY2006 Appropriations
Most Recent Developments
On July 26, 2005, the conferees of the Department of the Interior, Environment,
and Related Agencies appropriations bill, 2006 (H.R. 2361, H.Rept. 109-188)
provided $1.5 billion in supplemental appropriations for veterans medical services
for FY2005, with carryover authority for FY2006 as well. This action was taken by
Congress in response to the FY2005 budget shortfall of more than $1 billion
announced by the Administration.1 None of the supplemental appropriations would
be contingent upon an emergency declaration.2 The House adopted the conference
agreement on July 28, 2005 and the Senate adopted the conference agreement a day
later.
On July 21, 2005, the Senate Committee on Appropriations reported its version
of H.R. 2528 (S.Rept. 109-105) making appropriations for Military Construction and
Veterans Affairs and Related Agencies for FY2006 (MIL-CON appropriations bill).
Among other things, this bill would provide $33.5 billion, including collections
(copays and third-party insurance payments), for the Veterans Health Administration
(VHA) programs. This is $1.1 billion more than the Administration’s request for
FY2006 and $2.5 billion more than the House-passed version of this bill. The MIL-
CON appropriations bill would provide $23.3 billion for medical services, $2.9
billion for medical administration, $3.3 billion for medical facilities, $412 million for
medical and prosthetic research, and $1.5 billion for information technology
programs. It should be noted that the Committee has included bill language creating
a separate account for information technology. Prior to this restructuring expenses
for information technology was included in the medical administration account. The
Committee did not recommend any of the fee increases proposed by the President.
On May 26, 2005, the House passed its version of H.R. 2528 (H.Rept. 109-95)
making appropriations for Military Quality of Life and Veterans Affairs and Related
Agencies for FY2006 (MIL-QUAL appropriations bill). Among other things, H.R.
2528 provided $21 billion for medical services, $4.1 billion for medical
administration, $3.3 billion for medical facilities, and $393 million for medical and
prosthetic research. Under H.R. 2528, the total amount appropriated for veterans’
1 On June 23, 2005, at a hearing of the House Veterans’ Affairs Committee, the
Administration announced that the increased medical care cost for FY2005 was about $1
billion more than the FY2005 enacted amount.
2 By not designating funding as an emergency requirement the bill would exceed the funding
levels agreed by the House and Senate in the FY2005 Budget Resolution (H.Con.Res. 95,
H.Rept.108-498).

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health programs is $31 billion including $2.1 billion in collections (copays and
third-party insurance payments). The MIL-QUAL appropriations bill did not
authorize any of the fee increases proposed by the President.
Background
The Department of Veterans Affairs (VA) provides benefits to veterans who
meet certain eligibility rules. Benefits to veterans range from disability compensation
and pensions, education, training and rehabilitation services, hospital and medical
care, and other benefits, such as home loan guarantees and death benefits that cover
burial expenses. VA carries out its programs nationwide through three
administrations and the Board of Veterans Appeals (BVA). The Veterans Health
Administration (VHA) is responsible for health care programs. The Veterans
Benefits Administration (VBA) is responsible for providing compensation, pensions,
and education assistance among other things. The National Cemetery Administration
(NCA) is responsible for maintaining national veterans cemeteries.
VA’s budget includes both mandatory and discretionary spending accounts.
Mandatory funding supports disability compensation, pension benefits, vocational
rehabilitation, and life insurance, among other benefits and services. Discretionary
funding supports a broad array of benefits and services, including medical care. In
FY2005, discretionary budget authority accounted for approximately 47% of the total
VA budget authority, with most of this discretionary funding going toward
supporting VA medical care.
VHA operates the largest direct health care delivery system in the nation.3 In
FY2004, VHA operated 157 hospitals, 134 nursing homes, 42 residential
rehabilitation treatment centers, and 862 ambulatory care and community-based
outpatient clinics. VHA also pays for care provided to veterans by independent
providers and practitioners on a fee basis under certain circumstances. In addition,
VHA provides grants for construction of state-owned nursing homes and domiciliary
facilities, and collaborates with the Department of Defense (DOD) in sharing health
care resources and services.
During FY2004, VHA provided medical services to an estimated 4.7 million
unique veteran patients, a caseload that is expected to reach approximately 4.8
million in FY2005. According to VHA, this number will decrease to approximately
4.7 million by the end of FY2006.4 The total number of outpatient visits reached
49.9 million during FY2004, and is projected to increase to 52.8 million in FY2005
and 55.8 million in FY2006. In FY2004, VHA spent approximately 56% of its
medical care obligations on outpatient care.
3 Established in 1946 as the Department of Medicine and Surgery, succeeded in 1989 by the
Veterans Health Services and Research Administration, renamed the Veterans Health
Administration in 1991.
4 These are unduplicated veteran patients; this number and projections exclude
Readjustment Counseling, State Home, Civilian Health and Medical Program of VA
(CHAMPVA), Spina Bifida, Foreign Medical Program and non-veterans. Data provided by
VA.

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In addition, VHA manages the largest medical education and health professions
training program in the United States. Veterans’ health care facilities are affiliated
with 107 medical schools, 55 dental schools and more than 1,000 other schools
offering students allied and associated education degrees or certificates in 40 health
profession disciplines. In FY2004, over 84,000 health care professionals received
training in VA medical centers.5
This report provides: (1) a basic overview of the federal appropriation process;
(2) a brief overview of VHA’s enrollment process and its enrollment priority groups;
(3) a brief summary of funding levels for VHA for FY2005; (4) a discussion of the
FY2005 and FY2006 budget shortfall; and (5) a discussion of the Administration’s
budget proposals for FY2006 and the amounts passed by the House and
recommended by the Senate Appropriations Committee. This report will be updated
to show the funding levels passed by the Senate and ultimately enacted by Congress
and signed into law by the President.6
The Federal Budget
In general, the federal budget process begins with the submission of the
President’s budget request to Congress. Following this submission, the Budget
Committees of the House and Senate develop the annual budget resolution, which
sets forth aggregate spending and revenue levels, by functional levels of spending,
for the upcoming fiscal year and at least the following four fiscal years.7 The budget
resolution is not binding and does not allocate funds among specific programs or
accounts, but the major program assumptions underlying the functional amounts are
often discussed in the accompanying report.8 The House and Senate Appropriations
Committees subdivide their allocations among their respective subcommittees, which
are each responsible for one of the regular appropriations acts. Authorizing
committees for certain programs may also consider legislation that will affect
spending under their programs. A committee has the discretion to decide on the
legislative changes to be recommended. It is not bound by the program changes
recommended or assumed by the Budget Committees in the reports accompanying
the budget resolution.
Changes in Appropriation Committee Jurisdictions. At the beginning
of the 109th Congress, both the House and Senate Appropriations Committees
reorganized their respective subcommittees. The House Committee on
Appropriations reduced its number of subcommittees to ten from the original thirteen
subcommittees. The Senate Committee on Appropriations reduced its number of
subcommittees to twelve from the original thirteen subcommittees. The House
Subcommittee on Military Quality of Life and Veterans Affairs and Related Agencies
5 For a detailed description of veterans’ health care issues, see CRS Report RL32961,
Veterans’ Health Care Issues in the 109th Congress, by Sidath Viranga Panangala.
6 VHA and VA will be used interchangeably throughout this report to refer to VHA.
7 Specifically, budget function 700 includes funding for VA benefits and services.
8 For more information on the formulation of the budget resolution, see CRS Report 98-512,
Formulation and Content of the Budget Resolution, by Bill Heniff, Jr.

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received jurisdiction over funding for VA programs, among other things. Similarly,
the Senate Subcommittee on Military Construction and Veterans Affairs received
jurisdiction over appropriations for VA programs among other things. Prior to this
restructuring, appropriations legislation for VA programs was the responsibility of
the House and Senate Veterans Affairs, Housing and Urban Development, and
Independent Agencies Subcommittees.
VHA Health Care Enrollment
To understand VA’s medical care appropriations and the Administration’s major
policy proposals discussed later in this report, it is important to understand VA’s
enrollment process and its enrollment priority groups. The Veterans’ Health Care
Eligibility Reform Act of 1996, P.L. 104-262 required the establishment of a national
enrollment system to manage the delivery of inpatient and outpatient medical care.
The new eligibility standard was instituted by Congress to “ensure that medical
judgment rather than legal criteria will determine when care will be provided and the
level at which care will be furnished.”9
For most veterans, entry into the veterans’ health care system begins with
application for enrollment.10 A veteran may apply for enrollment at any time during
the year. Eligibility for VA health care is primarily based on “veteran’s status”
resulting from military service. “Veteran’s status” is established by active-duty status
in the military, naval, or air service and a honorable discharge or release from active
military service.
After “veterans’ status” has been established ,VA next places applicants into one
of two categories. The first group in general is composed of veterans with service-
connected disabilities or with lower incomes. These veterans are regarded by VA
as “high priority” veterans, and they are enrolled in Priority Groups 1-6 (see
Appendix 1). Veterans enrolled in Priority Groups 1-6 include:
! veterans in need of care for a service-connected disability;11
! veterans who have a compensable service-connected condition;
9 H.Rept. 104-690.
10 Veterans do not need to apply for enrollment in VA’s health care system if they fall into
one of the following categories: veterans with a service-connected disability rated 50% or
more (percentage ratings represent the average impairment in earning capacity resulting
from diseases and injuries encountered as a result of or incident to military service; those
with a rating of 50% or more are placed in Priority Group 1); less than one year has passed
since the veteran was discharged from military service for a disability that the military
determined was incurred or aggravated in the line of duty, but the VA has not yet rated; or
the veteran is seeking care from VA for only a service-connected disability (even if the
rating is only 10%).
11 The term “service-connected” means, with respect to disability, that such disability was
incurred or aggravated in line of duty in the active military, naval, or air service. VA
determines whether veterans have service-connected disabilities, and for those with such
disabilities, assigns ratings from 0 to 100 based on the severity of the disability.

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! veterans whose discharge or release from active military, naval or air
service was for a compensable disability that was incurred or
aggravated in the line of duty;
! veterans who are former prisoner of wars (POWs);
! veterans awarded the purple heart;
! veterans who have been determined by VA to be catastrophically
disabled;
! veterans of World War I;
! veterans who were exposed to hazardous agents (such as Agent
Orange in Vietnam) while on active duty; and
! veterans who have annual income and net worth below a VA-
established means test threshold.
VA also looks at applicants’ income and net worth to determine their specific
priority category and whether they have to pay copayments for nonservice-connected
care. In addition, veterans are asked to provide VA with information on any health
insurance coverage they have — including coverage through employment or through
a spouse. VA may bill these payers for treatment of conditions that are not a result
of injuries or illnesses incurred or aggravated during military service. Appendix 2
provides information on what categories of veterans pay for which services.
The second group is composed of veterans who don’t fall into one of the first
six priority groups. These veterans are primarily those with nonservice-connected
conditions and with incomes and net worth above the VA established means test
threshold, and in general these veterans are enrolled in Priority Group 7 or 8.
Funding for VHA
VHA is funded through multiple appropriations accounts that are supplemented
by other sources of revenue. Although the appropriations account structure has been
subject to change from year to year, traditionally the appropriation accounts used to
support VHA include medical care, medical and prosthetic research, and medical
administration. In addition, Congress also appropriates funds for construction of
medical facilities through a larger appropriations account for construction for all VA
facilities. Furthermore, the Committees on Appropriations include medical care cost
recovery collections when considering the amount of resources needed to provide
funding for VHA. VHA is authorized to bill some veterans and most health care
insurers for nonservice-connected care provided to veterans enrolled in the VA health
care system, to help defray the cost of delivering medical services to veterans. The
Balanced Budget Act of 1997 (P.L. 105-33) gave VHA the authority to retain these
funds in the Medical Care Collections Fund (MCCF). Instead of returning these
funds to the Treasury, VA can use this for medical services for veterans without
fiscal year limitations.12
12 For a detailed history of funding for VHA from FY1995 to FY2004, see CRS Report
RL32732, Veterans’ Medical Care Funding FY1995-FY2004, by Sidath Viranga Panangala.

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FY2005 Budget Summary
The Consolidated Appropriations Act, 2005 (P.L. 108-447)13,14 provided $30.1
billion in FY2005 for VHA — an increase of $1.2 billion over the FY2005
Administration’s request, and $1.9 billion over FY2004. As shown in Table 1, P.L.
108-447 provided $19.3 billion to finance medical services. Furthermore, it
appropriated $4.7 billion for medical administration, $3.7 billion for medical
facilities, and $402 million for medical and prosthetic research. Funding for VHA
included $1.9 billion in the MCCF. The Consolidated Appropriations Act, 2005,
also included $370 million from the construction major account and $182 million
from the construction minor account for Capital Asset Realignment for Enhanced
Services (CARES)-related activities. It should be noted that these amounts are not
included in the total VHA budget since construction major and construction minor
accounts are funded through separate construction accounts. The Consolidated
Appropriations Act, 2005, did not approve the Administration’s proposal to fund
VHA through an alternative account structure, and did not include any copayment
changes that were proposed in the President’s budget request.15
On October 13, 2004, the Military Construction Appropriations and Emergency
Hurricane Supplemental Appropriations Act, 2005 (P.L. 108-324, H.Rept. 108-773)
was signed into law. As enumerated in Table 1 this bill provided an additional $87
million for VHA for FY2005. On July 26, 2005, the conferees of the Department of
the Interior, Environment, and Related Agencies appropriations bill, 2006 (H.R.
2361, H.Rept. 109-188) provided $1.5 billion in supplemental appropriations for
veterans medical services for FY2005, with carryover authority for FY2006 as well.
This action was taken by Congress in response to the FY2005 budget shortfall of
more than $1 billion announced by the Administration(Table 1).
FY2006 VHA Budget
President’s FY2006 Budget
The President’s budget request for FY2006 was submitted to Congress on
February 7, 2005. The President’s budget requested approximately $30.4 billion for
VHA. This is an increase of $199 million over the FY2005 enacted amount. The
Administration’s request includes $20 billion for medical services, $4.5 billion for
medical administration, $3.3 billion for medical facilities, $393 million for medical
and prosthetic research. The budget request also included $2.17 billion in medical
13 U.S. Congress, Conference Committees, Consolidated Appropriations Act, 2005,
conference report to accompany H.R. 4818, 108th Cong., 2nd sess., H.Rept. 108-792.
14 The Consolidated Appropriations Act, 2005, was signed into law on Dec. 8, 2004.
15 For a detailed description of the FY2005 appropriations for VHA, see CRS Report
RL32548, Veterans’ Medical Care Appropriations and Funding Process, by Sidath Viranga
Panangala.

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care cost collections (a description of each of these accounts is given Appendix 3).16
It should be noted here that the funding levels described above excludes the
President’s budget amendment submitted on July 14,2005 (see description under
FY2005 and FY2006 budget shortfall).
House and Senate Budget Resolutions
On March 17, 2005 the House passed H.Con.Res. 95 (H.Rept. 109-17),
providing $31.7 billion for VA’s discretionary programs and $37.1 billion for
mandatory programs. The Senate approved its bill, S.Con.Res. 18, on the same day
and provided $68.9 billion for both discretionary and mandatory programs.17 The
House-passed budget resolution included a directive to the House Committee on
Veterans’ Affairs to reduce the level of direct spending on veterans’ programs by
$155 million for FY2006, but the Senate version did not.
On April 28, 2005, House and Senate conferees concluded negotiations on
H.Con.Res. 95 (H.Rept 109-62), the FY2006 budget resolution. The conference
agreement includes $31.8 billion in budget authority for VA discretionary programs
including veterans’ health care. This amount included $410 million over the
President’s recommended level of $31.4 billion for VA’s discretionary programs.
The conference agreement did not include any language directing the House and
Senate Committees on Veterans’ Affairs to reduce direct spending for veterans
programs.
FY2006 House Appropriations Bill
On May 23, 2005, the House Committee on Appropriations reported H.R. 2528,
(H.Rept. 109-95) making appropriations for Military Quality of Life and Veterans
Affairs and Related Agencies for FY2006 (MIL-QUAL appropriations bill). The
House passed H.R. 2528 on May 26, 2005. The MIL-QUAL appropriations bill
provided $30.9 billion for VHA, an increase of $617 million over the FY2006
President’s request, and $815 million over FY2005.
H.R. 2528 provided $21 billion for medical services. This is an increase of $1
billion over the President’s FY2006 request, and $1.6 billion above the FY2005
enacted level (see Table 1). The Committee designated $2.2 billion of this
recommended amount for speciality mental health care. According to the committee
report, the Committee took the unusual step of fencing off these funds for one
category of treatment because the Committee recognizes the need to dedicate
resources for this treatment, and wants to be assured that funding for mental health
care will not be used for other purposes.18
16 The terms “President’s budget request” and the “Administration’s budget request” will
be used interchangeably throughout this report to refer to the same document.
17 There is no Senate report to accompany S.Con.Res. 18.
18 U.S. Congress, House Committee on Appropriations, Military Quality of Life and
Veterans Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R.
(continued...)

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The MIL-QUAL appropriations bill also provided $4.1 billion for medical
administration, a $534 million decrease from the FY2005 enacted level and $383
million less than the Administration’s request. Most of this reduction is from VHA’s
information technology programs including the HealtheVet-VistA project.19 The
House Appropriations Committee recommended $3.3 billion for medical facilities,
a decrease of $464 million from FY2005 and the same as the President’s request.
Furthermore, the committee recommended $393 million for medical and prosthetic
research, the same as the Administration’s request and $9.3 million less than the
FY2005 enacted level (see Table 1). The committee report language stated that VA
should dedicate at least 20% of its research budget towards mental health research
programs. Furthermore, H.R. 2528 appropriated $607 million for construction major
projects and $209 million for construction minor projects, the same as the President’s
request for these accounts. The MIL-QUAL appropriations bill provided $25 million
for Grants for Construction of State Extended Care Facilities. This is $79 million
less than the FY2005 enacted amount. The Administration’s budget did not request
any funding for this program (see discussion below). It should be noted that these
amounts are not included in the total VHA budget since construction major,
construction minor, and grants for construction of state extended care facilities
accounts are funded through separate construction accounts.
FY2005 and FY2006 Budget Shortfall
On June 23, 2005, at a hearing of the House Veterans Affairs Committee the
Administration announced that the increased medical care cost for FY2005 was about
$1 billion more than the FY2005 enacted amount. At a hearing before the House
Appropriations Subcommittee on Military Quality of Life and Veteran Affairs on
June 28, 2005, the Secretary testified that for FY2006 veterans’ health care programs
would need $1.1 to $1.6 billion more than the FY2006 President’s request. On June
29, 2005 the Senate passed H.R. 2361 (H.Rept. 109-80) making appropriations for
the Department of the Interior, Environment and Related Agencies for FY2006.
Included in this bill was $1.5 billion in “emergency appropriations” for veterans’
medical services for FY2005.
On June 30, 2005, the Administration submitted a supplemental appropriations
request to Congress requesting an additional $975 million for medical services for
FY2005. This amount includes $273 million for increased workload due to new
veterans returning from Iraq and Afghanistan. When developing its budget for
FY2005 VA did not forecast the impact of the extended operations in Iraq and
Afghanistan. The FY2005 budget assumed that only 23,533 veteran patients from
and Iraq and Afghanistan would be entering the VA health care system; VA now
estimates this number to be 103,000. Furthermore, the total requested amount
includes $226 million for veterans long-term care, $200 million for increased
workload in Priority Groups 1-6 veterans, $58 million for reducing the backlog of
18 (...continued)
2528, 109th Congress, 1st session, H.Rept. 109-95, p. 53.
19 HealtheVet-VistA is a next generation computerized outpatient and inpatient information
system based on VA’s current Veterans Health Information Systems and Technology
Architecture (VistA). In general, VistA is an electronic medical record.

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veterans on waiting lists, $39 million for health care needs of dependents of 100%
service-connected veterans, $84 million for purchase of emergency medical
equipment, and $95 million for increased fuel and utility costs. Soon after the
Administration presented its budget request, the House passed H.R. 3130 providing
$975 million in supplemental FY 2005 appropriations for veterans medical services,
equal to the administration’s request. Although the bill does not specifically direct
how the money should be spent, it is expected that the $975 million would be
distributed as recommended by the administration.
On July 14, 2005, the Administration submitted a budget amendment for
FY2006 requesting an additional $1.97 billion for VA medical services. This amount
includes $276 million for increased workload due to returning veterans from Iraq and
Afghanistan and $600 million for veterans long-term care services. When
developing its FY2006 budget request the Administration underestimated the demand
for long-term care services. The budget assumed that the average daily census level
for long-term care would be 9,795; VA now estimates that this level should be
11,500.20 Moreover, the budget amendment includes $152 million for reducing the
backlog of veterans on waiting lists for medical appointments, $249 million to
address increases in the number of patients, $400 million to address increases in
utilization of services by veterans already receiving care from VA, and $300 million
to replenish the carryover funds from FY2005. When developing its FY2006 budget
request the Administration believed that it could carryover about $300 million from
FY2005 into FY2006. It should be also noted that this budget amendment assumes
the fee increases proposed in the President’s FY2006 budget request.21
In response to the FY2005 budget shortfall for VA medical services, on July 26,
2005 the conferees of the Department of the Interior, Environment and Related
Agencies, Appropriations bill, 2006 (H.R. 2361, H.Rept. 109-188) provided $1.5
billion in supplemental appropriations for VA medical services for FY2005. The bill
included language that would allow VA to carryover any unused funds into FY2006.
The House passed H.R. 2361 on July 28, 2005, and the Senate passed the measure
a day later. It is unlikely that the Senate will consider H.R. 3130 because H.R. 2361
provides the additional funding needed for FY2005.
FY2006 Senate Appropriations Bill
On July 21, 2005, the Senate Committee on Appropriations reported out of
committee H.R. 2528 (S.Rept. 109-105) making appropriations for Military
Construction and Veterans Affairs and Related Agencies for FY2006 (MIL-CON
appropriations bill). This bill would provide approximately $33.5 billion for VHA,
including collections (Table 1). This is $1.2 billion above the Presidents request and
20 Average daily census is the average number of people served on an inpatient basis on a
single day during the reporting period.
21 At a House Veterans Affairs Committee Hearing on July 21, 2005, the Under Secretary
for Health, Department of Veterans Affairs testified that “the total monetary effect of those
— or appropriation effect of the fee increases — was approximately $1 billion. And, in
absence of that, in addition to the $1.977 billion that we’ve come forward with the
presidential budget amendment request for, an additional $1 billion would be necessary.”

---

CRS-10
$2.5 billion above the House-passed amount. The total amount recommended for
VHA is composed of $23.3 billion for medical services including $1.97 billion in
“emergency appropriations” as requested by the President’s budget amendment,22
$2.9 billion for medical administration, $3.3 billion for medical facilities, $412
million for medical and prosthetic research, $1.5 billion for information technology
and $2.2 billion in medical care collections. It should be noted here that the
Committee has included bill language creating a separate account for information
technology for the entire VA and not specifically for VHA. This would separate
information technology from the medical administration account. According to the
committee report this new account structure will help VA to better organize its entire
information technology program and more accurately display and report VA’s
information technology efforts.
The MIL-CON appropriations bill has recommended $607 million for
construction major projects and $209 million for construction minor projects, the
same as the President’s request and the House-passed funding levels for these
accounts. Moreover, the MIL-CON appropriations bill provides $104 million for
grants for construction of state extended care facilities. This amount is the same as
the FY2005 enacted level and $79 million above the House-passed amount. The
Administration’s budget did not request any funding for this program (see discussion
below). It should be noted that these amounts are not included in the total VHA
budget because construction major, construction minor, and grants for construction
of state extended care facilities accounts are funded through separate construction
accounts.
Furthermore, the Committee did not approve any of the Administration’s fee
proposals. According to the committee report:
The Committee is not supportive of these new proposals which would force
hundreds of thousands of needy veterans to leave the VA system. To this end,
the Committee recommendation reflects the real fiscal needs of the VA without
charging the veteran population to make up the shortfall and has included direct
appropriations to cover the differences. In future budget submissions, the VA
should request a funding level that adequately represents the real needs of the
veterans in the VA system without devising new fees. Therefore, the Committee
directs that the VA not implement any of the new policy proposals, as submitted
in the budget request, without concurrence from the Committees on
Appropriations in both Houses of Congress.23
It is likely that the Senate will vote on the MIL-CON Appropriations bill after the
August recess.
22 By designating funding as an emergency requirement it is not subject to enforcement
procedures under the congressional budget process.
23 U.S. Congress, Senate Committee on Appropriations, Military Construction and Veterans
Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R. 2528,
109th Cong., 1st sess., S.Rept. 109-105, p. 48.

---

s
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---

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---

CRS-13
Key Budget Issues
In its FY2006 budget proposal the Administration is recommending a set of
legislative and regulatory proposals. The Administration asserts that these proposals
will refocus the veterans’ health care system to better meet the needs of high priority
core veterans — those with service-connected conditions, those with lower incomes,
and veterans with special care needs. Some of these proposals were proposed in
FY2004 and FY2005 as well, and were rejected by Congress.24
Changes in Cost-Sharing for Health Services
! Assess an annual enrollment fee of $250 for all Priority 7 and 8
veterans;
! Increase the veterans’ share of pharmaceutical copayments from $7
to $15 (for each 30-day prescription) for all enrolled veterans in
Priority Groups 7 and 8;
! Eliminate copayments for hospice care; and
! Authorize VA to pay for emergency care for enrolled veterans in
non-VA medical facilities.
Changes in Long-Term Care Services
! Revise eligibility criteria for VA sponsored long-term care and
restrict per-diem payments to state veterans nursing homes;
! Place a one year moratorium on grants for state extended care
facilities;
! Exempt former POWs from long-term care copayments; and
! Eliminate mandatory long-term care daily census requirements.
A detailed description of the above legislative proposals follows:
Legislative Proposals to Change the Cost-Sharing
Structure
Assess an Annual Enrollment Fee
The Administration proposes to establish an annual enrollment fee of $250
beginning October 1, 2005, for all Priority 7 and 8 veterans. Priority Group 7
veterans have incomes above $25,843 for a single veteran and below the Department
of Housing and Urban Development (HUD) geographic means test level.25 Priority
24 See CRS Report RL32548, Veterans’ Medical Care Appropriations and Funding Process,
by Sidath Viranga Panangala.
25 The means test tables are available at [http://www.huduser.org/Datasets/IL/IL04/]. Also
note that when determining if the veterans should be placed in Priority Group 7 or Priority
(continued...)

---

CRS-14
Group 8 veterans are those with incomes above $25,843 for a single veteran and
above the HUD geographic means test. The HUD geographic means test is
established at a local level such as county or city. For instance, a veteran with no
dependents residing in Cleveland County, Arkansas, whose annual income in 2004
was $26,149 will be placed in Priority Group 7, since the veteran’s annual income
is above VA’s means test threshold and below the geographic means test threshold
for FY2004 of $26,150. Similarly, a veteran with no dependents living in Trenton,
New Jersey, whose annual income in 2004 was $40,249 will be placed in Priority
Group 7, since the veteran’s annual income is above VA’s means test threshold and
below the geographic means test threshold for FY2004 of $40,250. It should noted
that there is wide variation in annual incomes of veterans placed in Priority Groups
7 and 8.
In its FY2004 and FY2005 budget submissions, the President requested
authority from Congress to levy an annual enrollment fee on all Priority 7 and
Priority 8 veterans. However, Congress did not approve imposing such a fee.
The House Committee on Appropriations did not include any language that
would impose an annual enrollment fee beginning in FY2006. The MIL-QUAL
appropriations bill passed by the House does not contain any provision that would
impose an enrollment fee. Likewise, the Senate Appropriations Committee did not
approve an annual enrollment fee.
Although the House Appropriations Committee did not approve imposing an
annual enrollment fee, the House Veterans Affairs Committee (majority members)
in its FY2006 views and estimates letter to the House Budget Committee
recommended a $230 enrollment fee for Priority Group 7 veterans, and a four tired
enrollment fee for Priority Group 8 veterans based on their income above the HUD
geographic means test. According to the Committee the fees would be: Tier 1 —
$230; Tier 2 — $250; Tier 3 — $350; Tier 4 — $500. The Committee’s views and
estimates letter further states that these enrollment fees would apply to both veterans
who are currently enrolled and new enrollees.
Similarly, the majority members of the Senate Veterans Affairs Committee in
its FY2006 views and estimates letter to the Senate Budget Committee did agree to
approve a $250 a year enrollment fee for higher income veterans who have no
service-connected injuries. It should be noted that at this time both the House and
Senate Veterans Affairs Committees have not introduced any measures that will give
VA the authority to implement this proposal.
Increase Pharmacy Copayments
The Administration proposes to increase the pharmacy copayments from $7 to
$15 for all enrolled Priority Group 7 and Priority Group 8 veterans whenever they
25 (...continued)
Group 8 based on income, the veteran’s income from the previous year is compared with the
appropriate geographic means test threshold for the previous fiscal year. For example,
annual income for 2004 is compared to the geographic means test threshold for FY2004.

---

CRS-15
obtain medication from VA on an outpatient basis for the treatment of a nonservice-
connected disability. At present, veterans in Priority Groups 2-8 pay $7 for a 30-day
supply of medication including over-the-counter medications.26 The Administration
put forward this proposal in its FY2004 and FY2005 budget requests as well, but did
not receive any approval from Congress.
Similar to the enrollment fee proposal, the House Committee on Appropriations
did not include any language that would increase the pharmacy copayment from $7
to $15. The MIL-QUAL appropriations bill passed by the House does not contain
any provision that would authorize such an increase in pharmacy copayments. The
Senate Appropriations Committee did not recommend increasing the pharmacy
copayment from $7 to $15.
The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) authorized VA
to charge most veterans $2 for each 30-day supply of medication furnished on a
outpatient basis for treatment of a nonservice-connected condition. The Veterans
Millennium Health Care and Benefits Act of 1999 (P.L. 106-117) authorized VA to
increase the medication copayment amount and to establish annual caps on the
medication copayment amount.27 An annual cap was established to eliminate
financial hardship for veterans enrolled in Priority Groups 2-6. When veterans reach
the annual cap, they continue to receive medications without making a copayment.
For calendar year 2005, the cap is $840. There is currently no cap for veterans in
Priority Groups 7 and 8 (see Appendix 2).
Impact of the Annual Enrollment Fee and Increase in Pharmacy
Copayments. According to actuarial projections done by VA, the $250 annual
enrollment fee and the increase in prescription drug copayments would reduce the
number of unique veteran patients in FY2006 by approximately 213,000, and 1.1
million veteran enrollees. The enrollment fees and increased copayments would
generate about $454 million in revenue and save VA an additional $202 million due
to reduced demand.
Exempt Copayments for Hospice Care
The Administration is proposing to exempt hospice care provided in all settings
from inpatient and outpatient copayments. Under current law, veterans receiving
hospice care may be subject to copayment obligations depending upon the type of
VA facility or setting in which they receive care. Veterans are subject to inpatient
copayments if they seek inpatient hospice care at facilities without nursing home
26 Veterans receiving a pension for a nonservice-connected disability from VA, veterans
with incomes below $10,162 (if no dependents), and $13,309 (with one dependent plus
$1,734 for each additional dependent ), veterans receiving care for conditions such as Agent
Orange, Military Sexual Trauma and combat veterans within two years of discharge, and
veterans who are former POW’s are exempt from paying copayments.
27 This law allowed VA to increase the copayment amount for each 30-day or less supply
of medication provided on an outpatient basis (other than medication administered during
treatment) for treatment of a nonservice-connected condition. Accordingly VA increased
the copayment amount from $2 to $7.

---

CRS-16
beds, or if the hospice care must be provided in an acute care setting as a result of
clinical complexity. Moreover, veterans choosing to remain at home for their
hospice care are subject to outpatient primary care copayments.
The Veterans Health Programs Improvement Act of 2004 (P.L. 108-422),
among other things, exempted veterans receiving hospice care at a nursing home
from extended care copayments.
The Veterans Health Care Act of 2005 (S. 1182) if enacted, among other things,
would authorize VA to exempt veterans receiving hospice care from any VA facility
or setting from copayment obligations.
Authorize VA to Pay for Emergency Care for Insured Veterans
The Administration is proposing to reimburse out-of-pocket expenses for
emergency care treatment provided to certain insured veterans in non-VA facilities.
Under current law, VA is authorized to reimburse all veterans for emergency
treatment furnished in non-VA facilities for nonservice-connected conditions if they
meet the following criteria: (1) they have enrolled in VA’s health care system; (2)
they have received care from VA within the 24-month period preceding the provision
of such emergency treatment; and (3) they are financially liable to the provider for
the emergency treatment. Veterans who have health insurance coverage for
emergency care, or are entitled to other federal benefits care (i.e., under Medicare or
Medicaid), or have other contractual or legal recourse are not eligible for
reimbursement. 28 Currently, VA does not reimburse the veteran’s out-of-pocket
expenses associated with nonservice-connected care.29
The Administration’s proposal would give VA the authority to pay for insured
veteran patients’ out-of-pocket expenses for emergency care services if emergency
care is obtained outside of the VA health care system for a nonservice-connected
condition. VA would be a secondary payer to private insurance or Medicare for
emergency care services. VA would cover the out-of-pocket expenses, that is the
amount of the co-payment the veteran would have been required to pay if the veteran
had received the care from VA for a nonservice-connected condition. A similar
proposal was included in the FY2005 budget request as well, however, there was no
legislative action on this proposal.
The Veterans Health Care Act of 2005 (S. 1182) if enacted, would authorize
VA to reimburse an eligible veteran for expenses resulting from emergency treatment
furnished in a non-VA facility for which the veteran remains personally liable.
28 Veterans Millennium Health Care and Benefits Act (P.L. 106-117).
29 VA fully reimburses veterans for emergency treatment obtained in non-VA medical
facilities for service-connected disabilities (38 U.S.C. § 1728).

---

CRS-17
Legislative Proposals to Change Long-Term
Care Services
Revise Eligibility Criteria for Long-Term Care and Per-Diem
Payments
VA’s long-term care program includes a continuum of services for the delivery
of care to veterans needing assistance due to chronic illness or physical or mental
disability. Long-term care services are provided in a variety of settings, including
institutional care in nursing homes, or home and community-based noninstitutional
care, and respite care services that temporarily relieves a caregiver from the burden
of caring for a chronically ill and disabled veteran in the home.
Nursing home care is provided through VA-operated nursing homes, VA
contracted community nursing homes, and state veterans nursing homes owned and
operated by individual states. VA pays a portion of the daily cost of care of veterans
residing in these homes, paying a per-diem ($59.36 in FY2005) for each eligible
veteran. VA does not directly place patients in state veterans homes as it does in
contracted community nursing homes; veterans must apply to the homes for
admission, and eligibility and admission requirements vary by each state.
In general, under current law any veteran who has a service-connected disability
rated at 70% or more qualifies for nursing home care. Veterans whose
service-connected disability is clinically determined to require nursing home care
also qualify. VA may provide nursing home care to other veterans if space and
resources are available. Veterans who have a service-connected disability are given
first priority for nursing home care.
In its FY2006 budget proposal the Administration proposes to revise VHA’s
eligibility criteria for long-term care services provided in VA, community, and state
nursing homes. Under the President’s proposal state veterans nursing homes would
receive per diem payments for Priority Groups 1-3 veterans and Priority Group 4
veterans who have catastrophic disabilities and who need short-term care (less than
90 days), or hospice or respite care.30 For Priority Group 4 veterans who are not
catastrophically disabled, and for Priority Groups 5-8 veterans, state veterans nursing
homes would be reimbursed only for short- term care subsequent to a hospital stay.
VA asserts that this proposal would save the department $294 million in FY2006.
The number of veterans in state nursing homes on whose behalf VA pays per-diem
payments would decrease from 17,328 in FY2004 to 7,217 in FY2006.
The House Committee on Appropriations rejected the Administration’s proposal
to restrict per diem payments to state veterans nursing homes. The committee report
30 Veterans are considered to be catastrophically disabled if they have a permanent severely
disabling injury, disorder, or disease that compromises the ability to carry out the activities
of daily living (ADL) such as eating, dressing, bathing, to such a degree that the individual
requires personal or mechanical assistance to leave home or bed or requires constant
supervision to avoid physical harm to self or others.

---

CRS-18
states that “VA should with the National Association of State Veterans Homes and
other stakeholders develop and implement solutions that will give veterans the best
options for quality long-term care.”31 According to the committee report, the amount
of funding provided under the medical services account is sufficient for providing
long-term care services in state veterans nursing homes without revising current
eligibility criteria for long-term care services.
Place a One-Year Moratorium on Grants for State Extended
Care Facilities
VA provides grants to states to acquire or construct extended care facilities, and
to expand, remodel, or alter existing buildings. A grant may not exceed 65% of the
total cost of the project.
In its FY2006 budget proposal, the Administration is proposing a one-year
moratorium on grants to state extended care facilities. During this one-year period
VA intends to complete a review of its long-term care infrastructure, comparing
projected demand against capacity. As a result of this proposed study, VA has not
requested any funding for FY2006 for grants for state extended care facilities. This
is a decrease of $104 million from FY2005.
The House Committee on Appropriations recommended $25 million for the
grant program. According to the committee report language, funds will be used for
safety improvements in existing state home facilities. Furthermore, the committee
directs VA to undertake an extensive analysis of veterans’ long-term care needs.
The Senate Appropriations Committee recommended $104 million for the grant
program. According to the committee report:
The Committee was disappointed that VA did not request any funding for this
program, nor did it provide any explanation for the action. The Committee
believes the VA decision to “suspend” this program was done solely to reduce
the budget request and has no substantive merit. Therefore, the Committee
recommendation includes a funding level that is equal to the fiscal year 2005
enacted level. To do any less could potentially jeopardize projects currently
awaiting funding as well as the welfare of deserving veterans32
Exempt Former Prisoners of War (POWs) from Long-Term
Care Copayments
The Administration is proposing to exempt former POWs from paying
copayments for long-term care services. The Veterans Health Care, Capital Asset,
31 U.S. Congress, House Committee on Appropriations, Military Quality of Life and
Veterans Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R.
2528, 109th Congress, 1st session, H.Rept. 109-95, p. 52.
32 U.S. Congress, Senate Committee on Appropriations, Military Construction and Veterans
Affairs and Related Agencies Appropriations Bill, 2006, report to accompany H.R. 2528,
109th Cong., 1st sess., S.Rept. 109-105, p. 65.

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and Business Improvement Act of 2003 (P.L. 108-170) provided VA with the
authority to exempt former POWs from medication copayments. At present, former
POWs have no copayment obligations for hospital and medical services, except for
long-term care services. This proposal would effectively end any remaining
copayment obligations on part of a former POW. It should be noted that the
Administration put forth a similar proposal in its FY2005 budget request as well,
however, there was no legislative action on this proposal.
The Veterans Health Care Act of 2005 (S. 1182) was introduced on June 7, 2005
by Senator Craig, Chairman of the Committee on Veterans Affairs. If enacted it
would eliminate copayment obligations on part of former POWs for long-term care
services. The Committee held a hearing on this measure on June 9, 2005.
Eliminate Mandatory Long-Term Care Daily Census
Requirements
The Administration is requesting Congress to repeal the mandatory staffing and
level of extended care service requirements under current law. The Veterans
Millennium Health Care and Benefits Act of 1999 (P.L. 106-117) required VA to
maintain its inpatient long-term care bed capacity at the 1998 level of 13,391. The
law specifically states:
The Secretary shall ensure that the staffing and level of extended care services
provided by the Secretary nationally in facilities of the Department during any
fiscal year is not less than the staffing and level of such services provided
nationally in facilities of the Department during fiscal year 1998.33
VA asserts that it seeks to provide long-term care services in the least restrictive
setting that is compatible with the veterans medical condition and personal
circumstances. VA believes that by repealing the mandatory staffing requirements
and requirements concerning the number of long-term care beds, it will be able to
provide veterans with home and community- based services (HCBS), while reserving
nursing home care for situations in which the veteran can no longer be cared for in
a home and community-based setting. According to VA, this proposal would reduce
the average daily census of veterans residing in VA nursing homes from 12,354 at
the end of FY2004 to 9,795 in FY2006 and save $202 million in FY2006. VA is
projecting an increase in both work load and funding for HCBS programs. The
number of veterans in HCBS programs is projected to increase from 25,523 in
FY2004 to 35,540 in FY2006. During this same period funding is projected to
increase from $287 million to $400 million. VA believes that projected increase in
HCBS programs will serve to offset some of the reductions in nursing home care.34
Section 3 of the Veterans Health Care Act of 2005 (S. 1182) contains a
provision that would repeal the mandatory staffing and level of extended care
requirements under current law.
33 P.L. 106-117, 113 STAT. 1548.
34 U.S. Department of Veterans Affairs, FY2006 Budget Submissions, Medical Programs,
vol. 2, pp. 8-18.

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Appendix 1. Priority Groups and Their Eligibility Criteria
Priority Group 1
Veterans with service-connected disabilities rated 50% or more disabling
Priority Group 2
Veterans with service-connected disabilities rated 30% or 40% disabling
Priority Group 3
Veterans who are former POWs
Veterans awarded the Purple Heart
Veterans whose discharge was for a disability that was incurred or aggravated in the line of duty
Veterans with service-connected disabilities rated 10% or 20% disabling
Veterans awarded special eligibility classification under Title 38, U.S. C., Section 1151, “benefits for
individuals disabled by treatment or vocational rehabilitation”
Priority Group 4
Veterans who are receiving aid and attendance or housebound benefits
Veterans who have been determined by VA to be catastrophically disabled
Priority Group 5
Nonservice-connected disabled veterans and noncompensable service-connected veterans rated 0% disabled
whose annual income and net worth are below the established VA Means Test thresholds
Veterans receiving VA pension benefits
Veterans eligible for Medicaid benefits
Priority Group 6
Compensable 0% service-connected disabled veterans
World War I veterans
Mexican Border War veterans
Veterans solely seeking care for disorders associated with
— exposure to herbicides while serving in Vietnam; or
— ionizing radiation during atmospheric testing or during the occupation of Hiroshima and Nagasaki; or
— for disorders associated with service in the Gulf War; or
— for any illness associated with service in combat in a war after the Gulf War or during a period of
hostility after November 11, 1998.
Priority Group 7
Veterans who agree to pay specified copayments who have income and/or net worth above the VA Means
Test threshold and income below the HUD geographic index
— Subpriority a: Noncompensable 0% service-connected disabled veterans who were enrolled in the VA
Health Care System on a specified date and who have remained enrolled since that date
— Subpriority c: Nonservice-connected disabled veterans who were enrolled in the VA Health Care
System on a specified date and who have remained enrolled since that date.
— Subpriority e: Noncompensable 0% service-connected disabled veterans not included in Subpriority a
above
— Subpriority g: Nonservice-connected disabled veterans not included in Subpriority c above
Priority Group 8
Veterans who agree to pay specified copayments with income and/or net worth above the VA Means Test
threshold and the HUD geographic index
— Subpriority a: Noncompensable 0% service-connected disabled veterans enrolled as of January 16,
2003 and who have remained enrolled since that date
— Subpriority c: Nonservice-connected disabled veterans enrolled as of January 16, 2003 and who have
remained enrolled since that date
— Subpriority e: Noncompensable 0% service-connected disabled veterans applying for enrollment after
January 16, 2003
Source: Department of Veterans Affairs.
Note: Service-connected disability means with respect to disability, that such disability was incurred or aggravated
in the line of duty in the active military, naval or air service.

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CRS-21
Appendix 2. Veterans’ Payments for
Health Care Services
Copayments
Insurance billing
Inpatient
Outpatient
Medicationa
Priority Group 1
No
No
No
Yes, but only if care
was for nonservice-
connected condition
Priority Groups
No
No
Yes, but only
Yes, but only if care
2, 3,b 4c
for veterans
was for nonservice-
with less than
connected condition
50% service
connected
disability and
medication is
for nonservice-
connected
condition
Priority Group 5
No
No
Yes
Yes, but only if care
was for nonservice-
connected condition
Priority Group 6
No
No
Yes
Yes, but only if care
(WWI, and 0%
was for nonservice-
service-connected
connected condition
compensable)
Priority Group 6
Nod
Nod
Nod
Yes, but only if care
(Veterans receiving
was for nonservice-
care for exposure or
connected condition
experienced)
Priority Group 7e
Yes
Yes
Yes
Yes, but only if care
was for nonservice-
connected condition
Priority Group 8f
Yes
Yes
Yes
Yes, but only if care
was for nonservice-
connected condition
Source: President’s Task Force to Improve Health Care Delivery for Our Nation’s Veterans
Note: Veterans receiving a pension for a nonservice-connected disability from VA, veterans with
incomes below $10,162 (if no dependents), and $13,309 (with one dependent plus $1,734 for each
additional dependent ), veterans receiving care for conditions such as Agent Orange, Military Sexual
Trauma and combat veterans within two years of discharge, and veterans who are former POWs are
exempt from paying outpatient prescription copayments for nonservice-connected conditions.
a. An annual medication copayment cap has been established for veterans enrolled in priority groups
2-6. Medication will continue to be dispensed after copayment cap is met. An annual
copayment cap has not been established for veterans enrolled in Priority Groups 7 or 8.
b. Veterans in receipt of a Purple Heart are in Priority Group 3. This change occurred with the
enactment of the Veterans Millennium Health Care and Benefits Act (P.L. 106-117) on Nov.
30, 1999.

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CRS-22
c. Priority Group 7 veterans who are determined to be catastrophically disabled and who are placed
in Priority Group 4 for treatment are still subject to the copayment requirements as a Priority
Group 7 veteran.
d. Priority Group 6 — health insurance and all applicable copayments will be billed when care is for
conditions not related to the veteran’s experience or exposure. Veterans in this priority group
could be subject to full medical care copayments or reduced inpatient copayments under means-
test criteria for nonservice-connected conditions. Combat veterans receiving care for a potential
service related condition within two years of discharge from the military are in Priority Group
6.
e. Priority Group 7 veterans — For inpatient copayments only, veterans enrolled in this priority group
are responsible for 20% of the inpatient copayment (in traditional insurance this is known as a
deductible) and 20% of the inpatient per diem copayment. The means-tested copayment
reduction does not apply to outpatient and medication copayments and veterans will be assessed
the full applicable copayment charges for nonservice-connected care.
f. Priority Group 8 veterans — For inpatient copayments only, veterans enrolled in this priority group
are responsible for the full inpatient copayment (in traditional insurance this is known as a
deductible) and the inpatient per diem copayment. Veterans in this priority group are also
responsible for the full outpatient and medication copayments for nonservice-connected care.
There is no means-tested copayment reduction.

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CRS-23
Appendix 3. VHA’s New Account Structure
Medical Services. This account provides funds for treatment of veterans and
eligible beneficiaries in VA medical centers, nursing homes, outpatient clinic
facilities, and contract hospitals. Hospital and out patient care is also provided by the
private sector for certain dependents and survivors of veterans under the Civilian
Health and Medical Program of VA (CHAMPVA). Funds are also used to train
medical residents, interns, and other professional, paramedical and administrative
personnel in health science fields to support VA’s medical programs. Overhead costs
associated with medical and prosthetic research are also funded by this account.
Medical Administration. This account provides funds for the management
and administration of VA’s health care system. Funds are used for the costs
associated with the operation of VA medical centers, other facilities, VHA
headquarters, costs of Veterans Integrated Service Network (VISN) offices, billing
and coding activities, and procurement.
Medical Facilities. This account provides funds for the operation and
maintenance of VHA’s infrastructure. Funds are used for costs associated with
utilities, engineering, capital planning, leases, laundry, food services,
groundskeeping, garbage disposal, facility repair, and selling and buying of property.
Medical and Prosthetic Research. This account provides funds for
medical, rehabilitative, and health services research. The medical and prosthetic
research program is an intermural program. In addition to funds from this
appropriation, reimbursements from the Department of Defense (DOD), grants from
the National Institutes of Health (NIH), and private sources supports VA researches.
Medical research supports basic and clinical studies that advances knowledge so that
efficient, and rational interventions can be made to prevent, care or alleviate disease.
The prosthetic research program is involved in the development of prosthetic,
orthopedic and sensory aids to improve the lives of disabled veterans. The health
services research program focuses on improving the outcome effectiveness and cost
efficiency of health care delivery for the veterans population. Overhead costs
associated with medical and prosthetic research are also funded by the medical
services account.
Medical Care Collections Fund (MCCF). VA deposits copayments
collected from veterans obligated to make such payments for either medical services
or inpatient pharmacy benefits for outpatient medication, and third-party insurance
payments from service-connected veterans for nonservice-connected conditions into
MCCF.
Previously copayments, third-party insurance payments, and fees for services
other than medical services or inpatient pharmacy benefits were deposited in several
medical collections accounts. In FY2004, the Administration’s budget requested
consolidating several medical collections accounts into MCCF. The conferees of the
Consolidated Appropriations Act of 2004 (H.Rept. 108-401) recommended that
collections that would otherwise be deposited in the Health Services Improvement
Fund (former name), Veterans Extended Care Revolving Fund (former name),

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Special Therapeutic and Rehabilitation Activities Fund (former name), Medical
Facilities Revolving Fund (former name), and the Parking Revolving Fund (former
name) should be deposited in MCCF.35 The Consolidated Appropriations Act of
2005, (P.L. 108-447, H.Rept. 108-792) provided VA with permanent authority to
deposit funds from these accounts into MCCF. The funds deposited in MCCF would
be available for medical services for veterans. These collected funds do not have to
be spent in any particular fiscal year and are available until expended.
35 For a detailed description of these former accounts, see CRS Report RL32548, Veterans’
Medical Care Appropriations and Funding Process, by Sidath Viranga Panangala.

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