Order Code RL33409
CRS Report for Congress
Received through the CRS Web
Veterans’ Medical Care:
FY2007 Appropriations
Updated September 5, 2006
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: FY2007 Appropriations
Summary
The Department of Veterans Affairs (VA) provides benefits to veterans who
meet certain eligibility rules. Benefits to veterans range from disability compensation
and pensions to hospital and medical care. VA provides these benefits to veterans
through three major operating units: the Veterans Health Administration (VHA), the
Veterans Benefits Administration (VBA), and the National Cemetery Administration
(NCA). VHA is primarily a direct service provider of primary care, specialized care,
and related medical and social support services to veterans through an integrated
health care system.
The President’s FY2007 budget proposal to Congress requested $32.7 billion
for VHA, an 11.3% increase over the FY2006 enacted amount of $29.3 billion, and
a 10% increase over the FY2005 enacted amount of $29.7 billion. As in previous
budget proposals, the President’s FY2007 budget request also includes a set of
legislative proposals. The Administration is requesting authorization from Congress
to assess an annual enrollment fee of $250 for all Priority 7 and 8 veterans, increase
veterans’ share of pharmaceutical copayments from $8 to $15 (for each 30-day
prescription) for all enrolled veterans in Priority Groups 7 and 8, and bill veterans
receiving treatment for nonservice-connected conditions for the entire copayment
amount.
On March 9, 2006, the Senate Budget Committee marked up the FY2007
Concurrent Resolution on the Budget (S.Con.Res. 83), and the Senate passed it on
March 16. In total, S.Con.Res. 83 calls for $74.8 billion for VA programs for
FY2007. This includes approximately $37.0 billion for VA’s discretionary programs,
which consist mainly of VA medical care, and $37.8 billion for VA’s mandatory
programs. On March 31, the House Budget Committee reported its version of the
FY2007 Concurrent Resolution on the Budget (H.Con.Res. 376, H.Rept. 109-402),
and the House adopted it on May 18. In total, H.Con.Res. 376 calls for $74.6 billion
for VA programs for FY2007. This includes $36.9 billion for VA’s discretionary
programs, and $37.8 billion for VA’s mandatory programs.
On May 19, 2006, the House passed the Military Construction, Military Quality
of Life, and Veterans Affairs Appropriations bill for FY2007 (H.R. 5385, H.Rept.
109-464). H.R. 5385 provides $32.7 billion for VHA for FY2007, an 11.4% increase
over the FY2006 enacted amount. On July 20, the Senate Committee on
Appropriations reported its version of H.R. 5385 ( S.Rept. 109-286). H.R. 5385, as
amended, provides $32.7 billion for VHA, about the same as the House-passed
amount and the President’s request. H.R. 5385 does not include any provisions that
would give VA the authority to implement fee increases as requested by the
President’s FY2007 budget proposal.
This report tracks the VHA’s FY2007 appropriations process, and will be
updated as legislative events warrant.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Eligibility for Veterans’ Health Care and
the Promise of Free Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
VHA Health Care Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Funding for VHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Medical Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Medical Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Medical and Prosthetic Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Medical Care Collections Fund (MCCF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FY2006 Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
House Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Budget Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Senate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Conference Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Defense Appropriations Bill FY2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
FY2006 Hurricane Supplemental for VA . . . . . . . . . . . . . . . . . . . . . . . . . . 13
House Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Senate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Conference Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FY2007 VHA Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Administration’s Budget Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
House and Senate Budget Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
House Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Construction Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Senate Committee Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Construction Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Key Budget Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Assess an Annual Enrollment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Increase Pharmacy Copayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Impact of the Annual Enrollment Fee and Increase
in Pharmacy Copayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Third-Party Offset of First-Party Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Appendix 1. Priority Groups and Their Eligibility Criteria . . . . . . . . . . . . . . . . 31
Appendix 2. Veterans’ Payments for Health Care Services . . . . . . . . . . . . . . . . 32
Appendix 3. Financial Income Thresholds for VA Health Care Benefits . . . . . 34

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List of Figures
Figure 1. Present Copayment Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Figure 2. Copayment Process Under New Proposal . . . . . . . . . . . . . . . . . . . . . . 30
List of Tables
Table1. VHA Appropriations FY2006-FY2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Table 2. Number of Patients Receiving Care from VA . . . . . . . . . . . . . . . . . . . . 4
Table 3. Medical Care Collections, FY2002-FY2005 . . . . . . . . . . . . . . . . . . . . 10
Table 4. VHA Appropriations by Account, FY2005-FY2007 . . . . . . . . . . . . . . 21
Table 5. Appropriations for VA Construction Projects, FY2005-FY2007 . . . . . 23
Table 4. Veterans’ Payments for Health Care Services by Priority Group . . . . . 32

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Veterans’ Medical Care:
FY2007 Appropriations
Most Recent Developments
On July 20, 2006, the Senate Committee on Appropriations reported out of
committee its version of the Military Construction and Veterans Affairs and Related
Agencies Appropriations bill ( MIL-CON-VA-appropriations bill) for FY2007 (H.R.
5385, H.Rept. 109-286). H.R. 5385, as amended, provides $32.7 billion for VHA for
FY2007, about the same as the House-passed amount and the President’s request
(Table 1). This amount includes $28.7 billion for medical services, a 26.0% increase
over the FY2006 enacted amount, and a 13.0% increase over the House-passed
amount (Table 4). Although it appears that the committee-recommended amount is
significantly higher than the President’s request ($25.5 billion) and the House-passed
amount ($25.4 billion), it should be noted that the committee combined the medical
administration account into the medical services account. The MIL-CON-VA-
appropriations bill also includes $3.6 billion for medical facilities and $412 million
for medical and prosthetic research. The Senate Appropriations Committee-reported
bill does not include any provisions that would give VA the authority to implement
fee increases as requested by the Administration’s budget proposal for VHA for
FY2007.
Table1. VHA Appropriations FY2006-FY2007
($ in thousands)
FY2007
FY2006
FY2007
FY2007
Senate
enacted
Request
House
Committee
Veterans
Health
$29,340,517
$32,657,000
$32,695,000
$32,670,000
Administration
(VHA)
Source: H.Rept. 109-464 and S.Rept. 109-286.
Background
The Department of Veterans Affairs (VA) provides a range of benefits and
services to veterans who meet certain eligibility rules, including disability
compensation and pensions, education, training and rehabilitation services, hospital
and medical care, home lone guarantees, and death benefits that cover burial

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expenses.1 VA carries out its programs nationwide through three administrations and
the board of veterans appeals (BVA). The Veterans Health Administration (VHA)
is responsible for health care services and medical research programs. 2 The Veterans
Benefits Administration (VBA) is responsible, among other things, for providing
compensations, pensions, and education assistance.3 The National Cemetery
Administration (NCA) is responsible for maintaining national veterans cemeteries,
providing grants to states for establishing, expanding or improving state veterans
cemeteries, and providing headstones and markers for the graves of eligible persons,
among other things.
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
FY2006, discretionary budget authority accounted for about 48% of the total VA
budget authority, with most of this discretionary funding going toward supporting
VA health care.
VHA operates the nation’s largest integrated direct health care delivery system.4
VA’s health care system is organized into 21 geographically defined Veterans
Integrated Service Networks (VISNs). While policies and guidelines are developed
at VA headquarters to be applied throughout the VA health care system, management
authority for basic decision making and budgetary responsibilities are delegated to
the VISNs.5 Congressionally appropriated medical care funds are allocated to the
VISNs based on the Veterans Equitable Resource Allocation (VERA) system, which
generally bases funding on patient workload.6 Prior to the implementation of the
VERA system, resources were allocated to facilities primarily on the basis of their
historical expenditures. Unlike other federally funded health insurance programs,
1 For a detailed description on eligibility for veterans disability benefits programs, see CRS
Report RL33113 Veterans Affairs: Basic Eligibility for Disability Benefit Programs, by
Douglas Reid Weimer.
2 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.
3 For a detailed description of veterans’ benefits issues, see CRS Report RL33216, Veterans
Benefits Issues in the 109th Congress, by Paul J. Graney.
4 Established on Jan. 3, 1946, as the Department of Medicine and Surgery by P.L. 79-293,
succeeded in 1989 by the Veterans Health Services and Research Administration, renamed
the Veterans Health Administration in 1991. This report will use VA and VHA
interchangeably to refer to the Veterans Health Administration (VHA).
5 Jian Gao, Ying Wang and Joseph Engelhardt, “Logistic Analysis of Veterans’ Eligibility-
Status Change,” Health Services Management Research, vol. 18, (Aug. 2005), p. 175.
6 About 90% of the VHA appropriation is allocated through VERA. Networks also receive
appropriated funds not allocated through VERA for such things as prosthetics, homeless
programs, readjustment counseling, and clinical training programs. VA facilities could also
retain collections from insurance reimbursements and copayments, and use these funds for
the care of veterans.

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such as Medicare and Medicaid, which finance medical care provided through the
private sector, VHA provides care directly to veterans.
In FY2005, VHA operated 156 hospitals, 135 nursing homes, 43 residential
rehabilitation treatment centers, and 711 community-based outpatient clinics
(CBOCs).7 VHA also pays for care provided to veterans by independent providers
and practitioners on a fee basis under certain circumstances. Inpatient and outpatient
care is provided in the private sector to eligible dependents of veterans under the
Civilian Health and Medical Program of the Department of Veterans Affairs
(CHAMPVA).8 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 FY2005, VHA provided medical care to about 4.9 million unique
veteran patients, a caseload that is estimated to increase by about 108,000, or 2.2%
in FY2006 (Table 2). According to VHA estimates, the number of unique veteran
patients is estimated to increase by approximately 45,000 in FY2007.9 As shown in
Table 2, there would be a 3.6% increase in the total number of unique patients (both
veterans and non-veterans), from 5.3 million in FY2005 to 5.5 million in FY2007.
The total number of outpatient visits reached 52.3 million during FY2005 and
is projected to increase to 55.5 million in FY2006 and 58.5 million in FY2007.10 In
FY2005, VHA spent approximately 61.7% of its medical care obligations on
outpatient care.
7 Data on the number of hospitals and nursing homes includes facilities damaged by
Hurricane Katrina. Data on the number of CBOCs differ from source to source. Some
count clinics located at VA hospitals while others count only freestanding CBOCs. The
number represented in this report excludes clinics located in VA hospitals. The data are
current as of Dec. 1, 2005.
8 For further information on CHAMPVA, see CRS Report RS22483, Health Care for
Dependents and Survivors of Veterans, by Jacqueline Rae Roche and Sidath Viranga
Panangala.
9 Based on information provided by VA to the House Committee on Veterans’ Affairs,
Subcommittee on Health, Feb. 14, 2006.
10 This number excludes outpatient care provided on a contract basis and outpatient visits
to readjustment counseling centers. U.S. Department of Veterans Affairs, FY2007
Congressional Budget Submissions, Medical Programs, vol. 1 of 4, p.3-17.

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Table 2. Number of Patients Receiving Care from VA
FY2005
FY2006
FY2007
Actual
Estimate
Estimate
Priority Groups 1-6 Veterans
3,561,709
3,733,496
3,813,457
Priority Groups 7 and 8 Veterans
1,301,283
1,237,144
1,202,345
Total Unique Veteran Patientsa 4,862,992
4,970,640
5,015,802
Non-Veteransb
445,322
471,312
482,588
Total Unique Patients
5,308,314
5,441,952
5,498,390
Source: Table prepared by CRS, based on data from the Department of Veterans Affairs.
a. Unique veteran patients include Operation Iraqi Freedom (OIF) and Operation Enduring Freedom
(OEF) veteran patients. These patients number : 100,808 in FY2005; 110,566 in FY2006; and
109,191 in FY2007.
b. Non-veterans include CHAMPVA patients, reimbursable patients with VA affiliated hospitals and
clinics, care provided on a humanitarian basis, and employees receiving preventive occupational
immunizations.
Since 1946, VHA has been associated with training physicians and other health
care professionals and has become an essential component of health care higher
education in the United States. Veterans’ health care facilities are affiliated with 107
of the nation’s 126 medical schools, and participate in graduate medical education
(GME) through integrated residency programs administered through medical schools
and academic health centers. VHA is also affiliated with over 1,200 other schools
offering students allied and associated education degrees and certificates in 40 health
profession disciplines. In FY2005, about 31,000 physician residents and fellows —
17,000 medical students, 24,000 nursing students, and 18,000 allied health residents
and fellows — received some or all of their training in VA medical centers.11
This report tracks VHA’s FY2007 appropriations and provides a brief summary
of funding levels for VHA for FY2006, including a discussion on supplemental
appropriations for FY2005 and FY2006. It discusses the Administration’s budget
proposal for FY2007, and the House-passed and Senate Appropriations Committee-
recommended amounts for FY2007. The report begins with a brief overview of
eligibility for VA health care, VHA’s enrollment process, and its enrollment priority
groups.
11 U.S. Department of Veterans Affairs, FY2007 Congressional Budget Submissions,
Medical Programs, vol. 1 of 4, p. 9-8.

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Eligibility for Veterans’ Health Care
and the Promise of Free Health Care

To understand VA’s medical care appropriations and the Administration’s major
policy proposals discussed later in this report, it is important to understand eligibility
for VA health care, VA’s enrollment process, and its enrollment priority groups.
Unlike Medicare or Medicaid, VA health care is not a entitlement program. Contrary
to numerous claims made concerning “promises” to military personnel and veterans
with regard to “free health care for life,” not every veteran is automatically entitled
to medical care from VA.12 Prior to eligibility reform in 1996, all veterans were
technically eligible for some care, however, the actual provision of care was based
on available resources.13
The Veterans’ Health Care Eligibility Reform Act of 1996, P.L. 104-262,
established two eligibility categories and required VHA to manage the provision of
hospital care and medical services through an enrollment system based on a system
of priorities.14 P.L 104-262 authorized VA to provide all needed hospital care and
medical services to veterans with service-connected disabilities, former prisoners of
war, veterans exposed to toxic substances and environmental hazards such as Agent
Orange, veterans whose attributable income and net worth are not greater than an
established “means test”, and veterans of World War I. These veterans are generally
known as “higher priority” or “core” veterans.15 The other category of veterans are
those with no service-connected disabilities and with attributable incomes above an
established “means test.”
P.L.104-262 also authorized VA to establish a patient enrollment system to
manage access to VA health care. As stated in the report language accompanying
P.L.104-262, “the Act would direct the Secretary, in providing for the care of “core”
veterans, to establish and operate a system of annual patient enrollment and require
that veterans be enrolled in a manner giving relative degrees of preference in
accordance with specified priorities. At the same time, it would vest discretion in the
Secretary to determine the manner in which such enrollment system would
operate.”16
Furthermore, P.L.104-262 was clear in its intent that the provision of health care
to veterans was dependent upon the available resources. The Committee report
12 For a detailed discussion of “promised benefits,” see CRS Report 98-1006, Military
Health Care: The Issue of “Promised” Benefits, by David F. Burrelli.
13 Barbara Sydell, Restructuring the VA Health Care System: Safety Net, Training and Other
Considerations, National Health Policy Forum, Issue Brief no. 716, March 1998. Available
at [http://www.nhpf.org/pdfs_ib/IB716_VA_3-25-98.pdf].
14 U.S. Congress, House Committee on Veterans Affairs, Veterans’ Health Care Eligibility
Reform Act of 1996, report to accompany H.R. 3118, 104th Cong. 2nd sess., H.Rept. 104-690
p. 2.
15 Ibid. p.5.
16 Ibid. p.6.

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accompanying P.L.104-262 states that the provision of hospital care and medical
services would be provided to “the extent and in the amount provided in advance in
appropriations Acts for these purposes. Such language is intended to clarify that
these services would continue to depend upon discretionary appropriations.”17
VHA Health Care Enrollment
As stated previously, P.L. 104-262 required the establishment of a national
enrollment system to manage the delivery of inpatient and outpatient medical care.
The new eligibility standard was created by Congress to “ensure that medical
judgment rather than legal criteria will determine when care will be provided and the
level at which care will be furnished.”18
For most veterans, entry into the veterans’ health care system begins by
completing the application for enrollment. Some veterans are exempt from the
enrollment requirement if they meet special eligibility requirements.19 A veteran may
apply for enrollment by completing the Application for Health Benefits (VA Form
10-10EZ) at any time during the year and submitting the form online or in person at
any VA medical center or clinic, or mailing or faxing the completed form to the
medical center or clinic of the veteran’s choosing.20 Once a veteran is enrolled in the
VA health care system the veteran remains in the system and does not have to re-
apply for enrollment annually. However, those veterans who have been enrolled in
Priority Group 5 based on income must submit a new VA Form 10-10EZ annually
with updated financial information demonstrating inability to defray the expenses of
necessary care.21
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. Generally, persons enlisting in one of the armed forces after
September 7, 1980, and officers commissioned after October 16, 1981, must have
completed two years of active duty or the full period of their initial service obligation
to be eligible for VA health care benefits. Veterans discharged at any time because
17 Ibid. p.5.
18 Ibid. p.4.
19 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%).
20 VA Form 10-10EZ is available at [https://www.1010ez.med.va.gov/sec/vha/1010ez/
#Process].
21 38 C.F.R. §17.36 (d)(3)(iv) (2005).

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of service-connected disabilities are not held to this requirement. Furthermore,
reservists who were called to active duty and who completed the term for which they
were called, and who were granted an other than dishonorable discharge, or were
National Guard members who were called to active duty by federal executive order,
and who completed the term for which they were called, and who were granted an
other than dishonorable discharge are also exempt from the 24 continuous months
of active duty requirement.
When not activated to full-time federal service, members of the reserve
components and National Guard have limited eligibility for VA health care services.
Members of the reserve components may be granted service-connection for any
injury they incurred or aggravated in the line of duty while attending inactive duty
training assemblies, annual training, active duty for training, or while going directly
to or returning directly from such duty. Additionally, reserve component
servicemembers may be granted service-connection for a heart attack or stoke if such
an event occurs during these same periods. The granting of service-connection
makes them eligible to receive care from VA for those conditions. National Guard
members are not granted service-connection for any injury, heart attack, or stroke that
occurs while performing duty ordered by a governor for state emergencies or
activities.22
After veteran’s status has been established ,VA next places applicants into one
of two categories. The first group is composed of veterans with service-connected
disabilities or with incomes below a established means test. 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;23
! veterans who have a compensable service-connected condition;
! veterans whose discharge or release from active military, naval or air
service was for a compensable disability that was incurred or
aggravated in the line of duty;
! veterans who are former prisoners of war (POWs);
! veterans awarded the purple heart;
! veterans who have been determined by VA to be catastrophically
disabled;
! veterans of World War I;
! veterans who were exposed to hazardous agents (such as Agent
Orange in Vietnam) while on active duty; and
! veterans who have an annual income and net worth below a VA-
established means test threshold.
22 38.U.S.C. §101(24); 38 C.F.R. §3.6(c).
23 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.
Percentages are assigned in increments of 10%.

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VA also looks at applicants’ income and net worth to determine their specific
priority category and whether they have to pay copayments for nonservice-connected
care. In addition, veterans are asked to provide VA with information on any health
insurance coverage they have, including coverage through employment or through
a spouse. VA may bill these payers for treatment of conditions that are not a result
of injuries or illnesses incurred or aggravated during military service. Appendix 2
provides information on what categories of veterans pay for which services.
The second group is composed of veterans who do not fall into one of the first
six priority groups. These veterans are primarily those with nonservice-connected
medical conditions and with incomes and net worth above the VA established means
test threshold. These veterans are enrolled in Priority Group 7 or 8.24 Appendix 3
provides information on income thresholds for VA health care benefits.
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. In FY2004, “to provide better oversight and [to] receive a more accurate
accounting of funds,” Congress changed VHA’s appropriations structure.25 The
Department of Veterans Affairs and Housing and Urban Development and
Independent Agencies Appropriations Act, 2004 ( P.L.108-199, H.Rept. 108-401)
funded VHA through four accounts: (1) medical services; (2) medical
administration; (3) medical facilities; and (4) medical and prosthetic research.
Provided below are brief descriptions of these accounts.
Medical Services. The medical services account covers expenses for
furnishing inpatient and outpatient care and treatment of veterans and certain
dependents, including care and treatment in non-VA facilities; outpatient care on a
fee basis; medical supplies and equipment; salaries and expenses of employees hired
under Title 38, United States Code; and aid to state veterans homes.
Medical Administration. The medical administration account provides funds
for the expenses in the administration of hospitals, nursing homes, and domiciliaries;
24 VA considers a veteran’s previous year’s total household income (both earned and
unearned income as well as his/her spouse’s and dependent children’s income). Earned
income is usually wages received from working. Unearned income can be interest earned,
dividends received, money from retirement funds, Social Security payments, annuities, or
earnings from other assets. The number of persons in the veterans family will be factored
into the calculation to determine the applicable income threshold. 38 C.F.R. § 17.36(b)(7)
(2005).
25 U.S. Congress, Conference Committees, Consolidated Appropriations Act, 2004,
conference report to accompany H.R. 2673, 108th Cong., 1st sess., H.Rept. 108-401, p. 1036.

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billing and coding activities; quality of care oversight; legal services; and
procurement.
Medical Facilities. The medical facilities account covers, among other
things, expenses for the maintenance and operation of VHA facilities; administrative
expenses related to planning, design, project management, real property acquisition
and deposition, construction, and renovation of any VHA facility; leases of facilities;
and laundry and food services.
Medical and Prosthetic Research. This account provides funding for VA
researchers to investigate a broad array of veteran-centric health topics such as
treatment of mental health conditions, rehabilitation of veterans with limb loss,
traumatic brain injury and spinal cord injury, organ transplantation, and the
organization of the health care delivery system. VA researchers receive funding not
only through this account but also from the Department of Defense (DOD), the
National Institutes of Health (NIH), and from private sources.
Medical Care Collections Fund (MCCF)

In addition to direct appropriations through the above accounts, the Committees
on Appropriations include medical care cost recovery collections when considering
the amount of resources needed to provide funding for VHA. The Consolidated
Omnibus Budget Reconciliation Act of 1985 (P.L. 99-272), enacted into law in 1986,
gave VHA the authority to bill some veterans and most health care insurers for
nonservice-connected care provided to veterans enrolled in the VA health care
system, to help defray the cost of delivering medical services to veterans.26
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 the funds to the Treasury, VA can use them for medical services for
veterans without fiscal year limitations.27 To increase VA’s third-party collections,
P.L. 105-33 also gave VA the authority to change its basis of billing insurers from
“reasonable costs” to “reasonable charges.”28 This change in billing was intended to
enhance VA collections to the extent that reasonable charges result in higher
payments than reasonable costs.29 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
26 Veterans’ Health-Care and Compensation Rate Amendments of 1985, 100 Stat. 372, 373,
383.
27 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.
28 Under “reasonable costs” VA billed insurers based on its average cost to provide a
particular episode of care. Under “reasonable charges” VA bills insurers based on market
pricing for health care services.
29 U.S. Government Accountability Office(GAO),VA Health Care: Third-Party Charges
Based on Sound Methodology; Implementation Challenges Remain, GAO/HEHS-99-124,
June 1999.

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CRS-10
collections that would otherwise be deposited in the Health Services Improvement
Fund (former name), Veterans Extended Care Revolving Fund (former name),
Special Therapeutic and Rehabilitation Activities Fund (former name), Medical
Facilities Revolving Fund (former name), and the Parking Revolving Fund (former
name) should be deposited in MCCF.30 The Consolidated Appropriations Act of
2005, (P.L. 108-447, H.Rept. 108-792) provided VA with permanent authority to
deposit funds from these five 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.
As shown in Table 3, MCCF collections increased by 56% from $1.2 billion in
FY2002 to almost $1.9 billion in FY2005. During this same period, first-party
collections increased by 59% from $485 million in FY2002 to $772 million in
FY2005. In FY2005, first-party collections represented approximately 41% of total
MCCF collections.
Table 3. Medical Care Collections, FY2002-FY2005
($ in thousands)
FY2002
FY2003
FY2004
FY2005
Actual
Actual
Actual
Actual
First-party pharmacy
$377,440
$576,554
$623,215
$648,204
copaymentsa
First-party copayments
108,392
104,994
113,878
118,626
for inpatient and
outpatient care
c
First-party long-term
3,461
5,077
5,411
care copaymentsb
Third-party insurance
689,767
804,141
960,176
1,055,597
collections
Enhanced use leasing
553
234
459
26,861
revenued
Compensated work
35,275
38,834
40,488
36,516
therapy collectionse
Parking feesf
3,283
3,296
3,349
3,443
Compensation and
788 376
634
2,431
pension living
expensesg
MCCF Total
$1,215,498
$1,531,890
$1,747,276
$1,897,089
Source: Table prepared by CRS based on data provided by the Department of Veterans Affairs.
Notes: The following accounts were not consolidated into MCCF until FY2004: enhanced use leasing
revenue; compensated work therapy collections; parking fees; and compensation and pension living
expenses. Collection figures for these accounts for FY2002 and FY2003 are provided for comparison
purposes.
30 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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a. In FY2002, Congress created the Health Services Improvement Fund (HSIF) to collect increases
in pharmacy copayments (from $2 to $7 for a 30-day supply of outpatient medication) that went
into effect on February 4, 2002. The Consolidated Appropriations Resolution, 2003 (P.L. 108-7)
granted VA the authority to consolidate the HSIF with MCCF and granted permanent authority
to recover copayments for outpatient medications.
b. Authority to collect long-term care copayments was established by the Millennium Health Care and
Benefits Act (P.L. 106-117). Certain veteran patients receiving extended care services from VA
providers or outside contractors are charged copayments.
c. VA started collecting long-term care copayments in June 2002; however, system changes weren’t
put in place until FY2003 to reflect them under long-term care copayments in FY2002.
d. Under the enhanced-used lease authority, VA may lease land or buildings to the private sector for
up to 75 years. In return VA receives fair consideration in cash and/or in-kind. Funds received
as monetary considerations may be used to provide care for veterans.
e. The compensated work therapy program is a comprehensive rehabilitation program that prepares
veterans for competitive employment and independent living. As part of their work therapy,
veterans produce items for sale or undertake subcontracts to provide certain products and/or
services such as providing temporary staffing to a private firm. Funds collected from the sale
of these products and/or services are deposited in the MCCF.
f. Parking program provides funds for construction, and acquisition of parking garages at VA medical
facilities. VA collects fees for use of these parking facilities.
g. Under the compensation and pension living expenses program, veterans who do not have either a
spouse or child, would have their monthly pension reduced to $90 after the third month a veteran
is admitted for nursing home care. The difference between the veteran’s pension and the $90
is used for the operation of the VA medical facility.
FY2006 Budget Summary31
During the past year, Congress considered several appropriation measures to
provide funding for VHA. Aside from the regular FY2006 appropriations bill that
provides funding for VHA, Congress passed several measures that included funding
to bridge the shortfall for VHA for FY2005 and provided additional funding for
FY2006. Given below is a brief description tracking Congressional action on
FY2006 appropriations for VHA. Table 4 provides details of funding levels for the
various accounts that comprise funding for VHA.
House Action
On May 23, 2005, the House Committee on Appropriations reported H.R. 2528
(H.Rept. 109-95), making appropriations for Military Quality of Life and Veterans
Affairs and Related Agencies for FY2006 (MIL-QUAL appropriations bill). The
House passed H.R. 2528 on May 26, 2005. The MIL-QUAL appropriations bill
appropriated $28.8 billion for VHA. Under the House-passed version of H.R. 2528,
the total amount of funds available for VHA was $31.0 billion, including $2.2 billion
in collections (see Table 3).
31 For a detailed description of VA Medical Care Appropriations for FY2006, see CRS
Report RL32975, Veterans’ Medical Care: FY2006 Appropriations, by Sidath Viranga
Panangala.

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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. Moreover, at a subsequent hearing
before the House Committee on 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 30, 2005, and July 14, 2005, respectively, the
President submitted to Congress a supplemental request to address the FY2005
shortfall and a budget amendment to address the additional funding needs of
FY2006. These two requests totaled $2.9 billion.
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 carry over any unused
funds into FY2006. The House passed H.R. 2361 on July 28, 2005, and the Senate
passed the measure a day later. The FY2006 Department of the Interior,
Environment, and Related Agencies appropriations bill was signed into law on
August 2, 2005 (P.L. 109-54).
Senate Action
On July 21, 2005, the Senate Committee on Appropriations reported out of
committee H.R. 2528 (S.Rept. 109-105) making appropriations for Military
Construction and Veterans Affairs and Related Agencies for FY2006 (MIL-CON
appropriations bill). This bill appropriated approximately $33.5 billion for VHA,
including $2.2 billion in collections (see Table 3).
Conference Agreement
On November 18, 2005, the House voted to adopt the conference report
(H.Rept. 109-305) making appropriations for Military Quality of Life, Military
Construction, Veterans Affairs, and Related Agencies for FY2006 (MIL-CON-
QUAL-VA Appropriations Act). The Senate adopted H.Rept. 109-305 by unanimous
consent that same day. The MIL-CON-QUAL-VA Appropriations Act was signed
into law by the President on November 30, 2005 (P.L.109-114). The
MIL-CON-QUAL-VA Appropriations Act appropriated $ 29.1 billion for VHA (not
shown in Table 3). This amount included $22.5 billion for medical services, $2.9
billion for medical administration, $3.3 billion for medical facilities and $412 million
for medical and prosthetic research. When Congress passed P.L.109-114, it
designated $1.2 billion as an emergency requirement, and included bill language that
required the President to declare the entire amount as an emergency. On January 28,
2006, the President designated $1.2 billion in funding for veterans’ health care as an
“emergency.”

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Defense Appropriations Bill FY2006
On October 28, 2005, President Bush submitted a reallocation request to
Congress to transfer previously appropriated funds to several agencies, including the
VA, to address various needs arising from the consequences of Hurricane Katrina.
Congress responded to the President’s proposed reallocation by attaching the
reallocation request to the conference version of the FY2006 Defense Appropriations
bill (H.R. 2863).
The conference agreement includes $225.2 million for VA medical services,
including $198.2 million to purchase medical equipment and supplies lost during the
Gulf Coast hurricanes, and $27.0 million for Avian Flu pandemic preparation (shown
in Table 3). H.R. 2863 also included $24.9 million for general operating expenses;
$200,000 to clean up and repair national cemeteries; $368 million for construction
major projects; and $1.8 million for the construction minor projects accounts (these
amounts are not shown in Table 3). The Department of Defense Appropriations Act,
2006 was signed into law on December 30, 2005 (P.L. 109-148).
FY2006 Hurricane Supplemental for VA
On February 16, 2006, the Administration submitted two separate FY2006
supplemental appropriations requests.32 One of these supplemental requests would
provide $19.8 billion for recovery and reconstruction activities in hurricane-affected
Gulf Coast areas. In this request the Administration requested $600 million for VA’s
construction major projects account to be used for rebuilding the VA Medical Center
in New Orleans, which was damaged by Hurricane Katrina. Proposed funding for
this project was previously included in the October 28, 2005 reallocation request, but
Congress provided only $75.0 million of the $368 million, for the purpose of advance
planning and design of the VA Medical Center in New Orleans. The conference
committee did not include the full amount of funding because it felt that there was
insufficient information to determine the actual cost of the project. In the FY2006
conference report, H.Rept. 109-359, VA was directed to report to the Committees on
Appropriations of both houses of Congress by February 28, 2006, on the long-term
plans for the replacement hospital construction. The report submitted by VA
estimated that the cost of construction of a new VA Medical Center in New Orleans
would be $636 million.
House Action. On March 17, 2006, the House passed the Emergency
Supplemental Appropriations Act for Defense, the Global War on Terror, and
Hurricane Recovery, 2006 (H.R. 4939, H.Rept. 109-388). The House-passed bill
provides $550 million for rebuilding the VA Medical Center in New Orleans, $50.0
million less than the Administration’s request. In addition, the Secretary of Veterans
Affairs is authorized to transfer up to $275 million of this amount to the medical
services account, to be used only for unanticipated costs related to the global war on
32 For further information see CRS Report RL33298, FY2006 Supplemental Appropriations:
Iraq and Other International Activities; Additional Katrina Hurricane Relief, coordinated
by Paul M. Irwin, and Larry Nowels.

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terror. Availability of the $550 million appropriation is made contingent on the
enactment of authority for it by June 30, 2006.
Senate Action. On May 4, 2006, the Senate passed its version of H.R. 4939
(S.Rept. 109-230). The Senate-passed bill provides $623 million for the construction
major projects account, $73.0 million above the House-passed amount. This includes
$561 million for the construction of a new VA Medical Center in New Orleans.
Together with the previous appropriation of $75.0 million in P.L.109-148, the total
amount of funding for reestablishing the VA Medical Center in New Orleans would
be $636 million. During the Senate Appropriations Committee markup of H.R.
4939, the Committee designated $62.0 million of the total amount provided for the
construction major projects account to be used for the disposal and cleanup of land
associated with the VA medical facility in Gulfport, Mississippi.
During floor consideration of H.R. 4939, the Senate adopted an amendment
offered by Senator Akaka to provide $430 million for the VHA medical services
account for FY2006. Of this amount: $168 million was designated to address
veterans’ mental health care needs, including Post-Traumatic Stress Disorder
(PTSD); and $80.0 million was designated for the provision of readjustment
counseling services to veterans. The amendment also included language that requires
the President to declare the entire amount of $430 million as an emergency
requirement.
Conference Agreement. On June 13 and 15, 2006, the House and Senate,
respectively, adopted the conference report to accompany the Emergency
Supplemental Appropriations Act for Defense, the Global War on Terror, and
Hurricane Recovery, 2006 (H.R. 4939, H.Rept. 109-494). The bill was signed into
law (P.L.109-234) on June 15. P.L. 109-234 provides $586 million for construction
major projects account. Of this amount, $550 million would be for the construction
of a new VA medical center in New Orleans, Louisiana, and $36.0 million would be
for the removal of debris and cleanup of the former VA medical center in Gulf Port,
Mississippi.
P.L. 109-234 did not include a provision to provide $430 million for the VHA
medical services account for FY2006. Furthermore, it should be noted that the
Emergency Supplemental Appropriations Act for Defense, the Global War on Terror,
and Hurricane Recovery, 2006, included a provision to rescind $198.2 million
appropriated under P.L.109-148 to the medical services account, and to reappropriate
this same amount under P.L.109-234 (seeTable 4).

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FY2007 VHA Budget
Administration’s Budget Request
On February 6, 2006, the President submitted his FY2007 budget proposal to
Congress. The Administration requested $32.7 billion for VHA, an 11.3% increase
over the FY2006 enacted amount of $29.3 billion, and a 10% increase over FY2005
enacted amount of $29.7 billion. (see Table 4). The FY2007 request included $25.5
billion for medical services, a 12% increase over the FY2006 enacted amount; $3.2
billion for medical administration, an 11.2% increase over FY2006; $3.6 billion for
medical facilities, an 8.2% increase over FY2006; and $399 million for medical and
prosthetic research, a 3.2% decrease from the FY2006 enacted amount.
The President’s FY2007 budget request also includes a set of legislative
proposals that the Administration asserts “will continue to concentrate VA’s health
care resources to meet the needs of high priority core veterans — those with
service-connected conditions, those with lower incomes, and veterans with special
health care needs.”33 These legislative proposals are discussed in detail under the key
budget issues section of this report.
House and Senate Budget Resolutions
On March 31, 2006, the House Budget Committee reported H.Con.Res. 376
(H.Rept. 109-402), providing $36.9 billion for VA’s discretionary programs, which
consist mainly of VA medical care. This amount includes an amendment offered by
Representative Bradley increasing the discretionary budget authority by $795 million
over the President’s recommended level. According to the committee report
language, the recommended amount does not assume the President’s proposal to
implement enrollment fees and increase drug copayments for Priority Group 7 and
8 veterans.34 H.Con.Res. 376 also calls for budget authority of $37.8 billion for VA’s
mandatory programs. In total, the committee-reported budget resolution calls for
$74.6 billion for VA programs for FY2007. H.Con.Res. 376 was adopted by the
House on May 18.
On March 9, 2006, the Senate Budget Committee marked up S.Con.Res. 83, and
the Senate passed it on March 16. On the Senate floor, $823 million was added to
the committee-recommended amount to provide an additional $795 million to VA
Medical Services, in lieu of enactment of the proposed pharmacy copayment increase
and the new enrollment fee, and $28 million to increase VA’s medical & prosthetic
research funding. In total S.Con.Res. 83 calls for $74.8 billion for VA programs for
FY2007. This includes approximately $37.0 billion for VA’s discretionary programs,
and approximately $37.8 billion for mandatory programs.
33 Office of Management and Budget, Budget of the United States Government, Fiscal Year
2007, Appendix, p. 956.
34 U.S. Congress, House Committee on the Budget, Concurrent Resolution on the Budget-
Fiscal Year 2007, report to accompany H.Con.Res. 376, 109th Cong., 2nd sess., H.Rept. 109-
402, p. 45.

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House Action
On May 10, 2006, the House Committee on Appropriations approved by voice
vote its version of the Military Construction, Military Quality of Life, and Veterans
Affairs Appropriations bill (MIL-CON-QUAL-appropriations bill) for FY2007 (H.R.
5385, H.Rept. 109-464). The bill was reported out of committee on May 15, 2006.
The House passed H.R. 5385 on May 19, 2006.
H.R. 5385 provides $32.7 billion for VHA, a $3.4 billion (11.4%) increase
over the FY2006 enacted amount of $29.3 billion, and about the same as the
President’s request. This amount includes $25.4 billion for medical services, $100
million less than the President’s request and $2.6 billion (11.6%) over the FY2006
enacted amount of $22.8 billion (see Table 4). Of the amount provided for medical
services, the committee has included bill language designating that not less than $2.8
billion shall be used for specialty mental health care, which includes funding for the
treatment of Post-Traumatic Stress Disorder (PTSD), and funding for the three
“Centers of Excellence” for mental health care treatment, established by last year’s
appropriations act (P.L.109-114).35 This is a $600 million increase in funding for
mental health programs compared to FY2006, and when adjusted for inflation, this
is a $400 million increase over FY2006.36
The MIL-CON-QUAL-appropriations bill for FY2007 also provides $3.3 billion
for medical administration, $100 million above the Administration’s request of $3.2
billion, and $3.6 billion for medical facilities, $25 million above the budget request.
As stated in H.Rept. 109-464, this increase is provided for the establishment of at
least 10 new Community-Based Outpatient Clinics (CBOCs) in FY2007.37 These 10
CBOCs would be in addition to the 27 CBOCs that VHA plans to activate in
FY2007.38
H.R. 5385 also provides $412 million for medical and prosthetic research, a
3.2% increase over the President’s request of $399 million (see Table 4). During
35 For further details about these “Centers of Excellence,” see CRS Report RL32395,
Veterans Medical Care: FY2006 Appropriations, by Sidath Viranga Panangala.
36 U.S. Congress, House Committee on Appropriations, Military Quality Of Life and
Veterans Affairs, and Related Agencies Appropriations Bill, 2007, report to accompany H.R.
5385, 109th Congress, 2nd session, H.Rept. 109-464, p.50.
37 Ibid. p.58.
38 On June 23, 2006, VA announced plans to open 25 new CBOCs in 17 states and American
Somoa. The following facilities would become operational in CY2006: Bessemer,
Alabama; Tafuna, American Samoa; Miami-Globe, Northwest Tucson and Southeast
Tucson, Arizona; South Orange County, California; Dover, Delaware; Athens, Georgia;
Canyon County, Idaho; Spirit Lake, Iowa; Hazard and Florence, Kentucky; Bemidji,
Minnesota; Holdrege, Nebraska; Fallon, Nevada; Franklin, Hamlet, and Hickory, North
Carolina; Cambridge and Newark, Ohio; Hamblen, Tennessee; Conroe, Texas; Lynchburg
and Norfolk, Virginia; Rice Lake, Wisconsin.

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committee markup of H.R. 5385, several amendments were offered to increase
funding for veterans’ health care; however, none of these amendments was adopted.39
Construction Projects. H.R. 5385 provides $599 million for VA
construction projects, including funding for Capital Asset Realignment and for
Enhanced Services (CARES) projects (Table 5).40 A large portion of this amount is
for construction and building improvements of VA medical facilities. The
committee-recommended amount is $83 million (12.2%) less than the President’s
request. The reason for this decrease is because the committee has not provided
funding for several construction projects that were included in the President’s budget
request, including funding for refurbishment of the operating rooms at the Columbia,
Missouri VA medical center, and for refurbishment of the Spinal Cord Injury Center
at the Milwaukee, Wisconsin VA medical center. The committee believes that these
are “low priority projects.” In addition, the committee recommendation does not
include funding for the replacement of the VA medical center in Denver, Colorado,
because the estimate for construction of the new facility has almost doubled in less
than two years, from $328 million to $621 million. According to the committee
report, “this is a project at a stage where work can be halted before significant and
irreversible financial damage is done.”41 The Administration issued a statement on
May 19, opposing the funding reduction for the CARES program. The
Administration stated that “this reduction would slow CARES projects designed to
renovate and modernize VA’s health care infrastructure and provide greater access
to high quality care for more veterans, closer to where they live.”42
However, H.R. 5385 includes funding for the upgrade and modernization of VA
research facilities. According to H.Rept. 109-464, the committee is concerned that
many VA research facilities have run out of adequate research space, and that some
facilities frequently need upgrades of their ventilation, electrical supply, and
plumbing systems. The committee has directed VA to institute a process by which
research infrastructure needs are given full and careful consideration.43

39 For a tally of roll call votes on these amendments, see U.S. Congress, House Committee
on Appropriations, Military Quality Of Life and Veterans Affairs, and Related Agencies
Appropriations Bill, 2007, report to accompany H.R. 5385, 109th Congress, 2nd session,
H.Rept. 109-464, pp. 80-81.
40 For a detailed description of the Capital Asset Realignment for Enhanced Services
(CARES) program, see CRS Report RL32961, Veterans’ Health Care Issues in the 109th
Congress, by Sidath Viranga Panangala.
41 U.S. Congress, House Committee on Appropriations, Military Quality Of Life and
Veterans Affairs, and Related Agencies Appropriations Bill, 2007, report to accompany H.R.
5385, 109th Congress, 2nd session, H.Rept. 109-464, p.62.
42 Executive Office of the President, Office of Management and Budget, Statement of
Administration Policy, H.R. 5385 — Military Construction, Military Quality of Life and
Veterans Affairs Appropriations Bill, FY2007, May 19, 2006, p. 2 [http://www.whitehouse.
gov/omb/legislative/sap/109-2/hr5385sap-h.pdf], visited August, 28, 2006.
43 Ibid. pp.63-64.

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CRS-18
The MIL-CON-QUAL-Appropriations bill did not include any fee increases as
requested by the Administration’s budget proposal for VHA for FY2007.
Senate Committee Action
On July 20, 2006, the Senate Appropriations Committee reported out of
committee its version of the Military Construction and Veterans Affairs and Related
Agencies Appropriations bill (MIL-CON-VA- appropriations bill) for FY2007 (H.R.
5385, S.Rept. 109-286). The committee-approved version of the bill provides $32.7
billion for VHA. This amount is almost equivalent to the President’s request and the
House-passed amount (Table 4).
H.R. 5385, as amended, provides $28.7 billion for medical services, a 12.5 %
increase above the President’s request, and 13.0% above the House-passed amount.
Although the committee-approved amount appears significantly higher than the
President’s request and the House-passed amounts, it should be noted that the
committee has combined the medical administration account and the medical services
account.
The Senate Appropriations Committee-approved version of H.R. 5385 also
provides $3.6 billion for medical facilities, which is the same as the Administration’s
request and $25.0 million less than the House-passed amount, and $412 million for
medical and prosthetic research. This amount is the same as the House-passed
amount and $13.0 million above the President’s request (Table 4).
Unlike the House-passed version of H.R. 5385, the Senate Appropriations
Committee has not earmarked funding for mental health care programs, including
PTSD. However, it has expressed interest in several areas as they relate to veterans’
health care. The committee has indicated that it is keenly interested in knowing
about progress made with the three “Centers of Excellence” specializing in mental
health and PTSD created by P.L.109-114, in Waco, Texas; San Diego, California;
and Canandaigua, New York. It has also directed the VA to begin implementing a
plan to expand more outpatient blind rehabilitation services.44
The committee has voiced concern about the growing number of veterans
returning from combat operations overseas who are not being properly screened for
Traumatic Brain Injury (TBI). The committee has included report language
encouraging the VA in coordination with the four Polytrauma Centers in
Minneapolis, Minnesota; Palo Alto, California; Richmond, Virginia; and Tampa,
Florida to establish a separate education and diagnosis screening program for VA
medical centers and Vet Centers.45
Furthermore, the committee has indicated that it “recognizes the increased and
ongoing pressures facing military families, and believes it is important to take a
44 U.S. Congress, Senate Committee on Appropriations, Military Construction and Veterans
Affairs and Related Agencies Appropriations Bill, 2007, report to accompany H.R. 5385,
109th Cong., 2nd sess., S.Rept. 109-286, p. 53.
45 Ibid. p.50.

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CRS-19
proactive, preemptive approach in helping veterans, particularly those in the National
Guard and Reserves, and their families adjust to deployments and the transition home
after the battlefield.”46 Therefore, the committee has directed the VA to look at a
DOD program that has been successfully utilized by Army families, which “focuses
on goals, family strengthening, and communication as tools to deal with stressful
situations.”47 According to S.Rept. 109-286, “the program can be successfully
facilitated by Vet Center staff and can help veterans and their families to deal with
both the transition from active duty to civilian life and the call up to active duty for
National Guardsmen and Reservists.”48 The committee has also included report
language requesting VA to establish CBOCs in Bellingham and Centralia,
Washington; Alpena, Michigan; and in rural Colorado.
Construction Projects. The Senate Appropriations Committee approved
version of H.R. 5385 provides $682 million for VA construction projects including
funding for CARES projects (Table 5). This is a 14.0% increase over the House-
passed amount, and the same as the President’s request. A large portion of this
amount will be for the constructing, altering, and renovation of VA medical facilities.
The committee has expressed concern about VA’s construction schedule, and
directed VA to provide reports on the delays in construction. It has also included
report language directing VA to provide a report on the Orlando, Florida, VA
Medical Care Facility. According to S.Rept. 109-286, “in FY2004, Congress
appropriated $25 million for a medical care facility at Orlando, Florida. Since then,
VA has made no progress on the design and construction of this hospital.”49
Furthermore, the Senate Appropriations Committee has urged VA to include $28.5
million in the FY2008 budget request for the construction of a 90-bed nursing home
and adult day care center at the Beckley VA Medical Center in West Virginia, and
to include $3.6 million for planning and design work associated with the renovation
and expansion of primary, mental health, and specialty outpatient care facilities at the
Martinsburg VA Medical Center, also in West Virginia.
The MIL-CON-VA- appropriations bill for FY2007 does not include any fee
increases as requested by the Administration’s budget proposal for VHA for FY2007,
and the committee has strongly expressed its displeasure about the Administration’s
fee proposals:
The [VA] continues to assume congressional approval of its policy and
legislative proposals before the Congress has done so.... This practice of
under-requesting the true needs of the Department to care for our veterans,
with the mandate that the Congress either enact the fees, shortchange veterans
healthcare, or make up the difference, is not responsible budgeting. In the
strongest terms possible, this Committee directs [VA] not to submit another
budget using assumed fees and copayments until such time as the Congress
46 Ibid. p.53.
47 Ibid. p.54.
48 Ibid. p.54.
49 Ibid. p 62.

---

CRS-20
approves and authorizes the Department to implement new revenue
enhancing policies.50
50 Ibid. p.44.

---

CRS-21
Table 4. VHA Appropriations by Account, FY2005-FY2007
($ in thousands)
FY2007
FY2005
FY2006
FY2006
FY2006
FY2006
FY2007
FY2007
Senate
Program
enacted
request
House
Senate
enacted
request
House
Committee
Medical services
$19,316,995 $19,995,141 $20,995,141 $21,331,011
$21,322,141 $25,512,000 $25,412,000 $28,689,000
Supplemental appropriations (P.L. 108-324)
38,283
—
—
—
—
—
—
—
Supplemental appropriations
1,500,000a
—
—
—
—
—
—
—
Emergency appropriations
—
1,977,000b
—
1,977,000c
1,225,000d
—
—
—
Emergency appropriations — Defense, the Global War on
Terror, and Hurricane Recovery
(P.L 109-234)
—
198,265
—
—
198,265e
—
—
—
Emergency appropriations — Avian Flu Pandemic
(P.L.109-148)
—
27,000
—
—
27,000
—
—
—
Subtotal medical services
20,855,278
22,197,406
20,995,141
23,308,011
22,772,406
25,512,000
25,412,000
28,689,000f
Medical administration
4,667,360
4,517,874
4,134,874
2,858,442
2,858,442
3,177,000
3,277,000
—
Supplemental appropriations (P.L. 108-324)
1,940
—
—
—
—
—
—
—
Subtotal medical administration
4,669,300
4,517,874
4,134,874
2,858,442
2,858,442
3,177,000
3,277,000
—
Medical facilities
3,715,040
3,297,669
3,297,669
3,297,669
3,297,669
3,569,000
3,594,000
3,569,000
Supplemental appropriations (P.L. 108-324)
46,909
—
—
—
—
—
—
—
Subtotal medical facilities
3,761,949
3,297,669
3,297,669
3,297,669
3,297,669
3,569,000
3,594,000
3,569,000
Medical and prosthetic research
402,348
393,000
393,000
412,000
412,000
399,000
412,000
412,000
Information technology
—
—
—
1,456,821
—
—
—
—
Total VHA appropriations (without collections)
29,688,875
30,405,949
28,820,684
31,332,943
29,340,517
32,657,000
32,695,000
32,670,000
Medical care cost collection (MCCF)g
1,985,984
2,170,000
2,170,000
2,170,000
2,170,000
2,329,000
2,329,000
2,329,000
Total: VHA (appropriations and collections)
$31,674,859 $32,575,949 $30,990,684 $33,502,943
$31,510,517 $34,986,000 $35,024,000 $34,999,000
Source: Table prepared by the Congressional Research Service based on H.Rept. 108-674; S.Rept. 108-353; H.Rept. 109-95; S.Rept. 109-105; H.Rept. 109-305; H. Rept.109-359;
H.Rept. 109-464; H.Rept. 109-494; and S.Rept. 109-286.

---

CRS-22
Note: Appropriation amounts for FY2005 adjusted to account for the 0.8% across-the-board reduction in most discretionary accounts as called for in Division J, Section 122 (a)(1)
of P.L. 108-447. Supplemental appropriations for FY2005 are not subject to the 0.8% across-the-board reductions. Appropriation amounts for FY2006 are not subject to any cross-the-
board reductions as stipulated in Division B, Title III, Section 3801(c)(2) of P.L.109-148.

a. On August 2, 2005, the FY2006 Department of the Interior, Environment, and Related Agencies appropriations bill (H.R 2361, P.L. 109-54) was signed into law.
b. On July 14, 2005, the Administration requested an additional $1.977 billion for medical services for FY2006.
c. On July 21, 2005, the Senate Committee on Appropriations reported H.R. 2528 favorably out of committee (S.Rept. 109-105), and designated this amount as an emergency
appropriation.
d. On November 18, 2005, the House and Senate adopted the conference report (H.Rept.109-305) to accompany H.R. 2528, and designated this amount as an emergency appropriation.
e. This amount was previously appropriated under the FY2006 Defense Appropriations Act (P.L.109-148).
f. The Senate Appropriations Committee combined the medical administration account into the medical services account.
g. Medical Care Cost Collection Fund (MCCF) receipts are restored to VHA as an indefinite budget authority equal to the revenue collected, estimated to be $1.985 billion in FY2005,
$2.17 billion in FY2006, and $2.33 billion in FY2007.

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CRS-23
Table 5. Appropriations for VA Construction Projects, FY2005-FY2007
($ in thousands)
FY2005
FY2006
FY2007
FY2007
FY2007 Senate
Enacted
Enacted
Request
House
Committee
Construction, major projectsa
$455,130
$607,100
$399,000
$283,670
$429,000
Emergency Appropriations
—
367,500
—
—
—
— Gulf Coast Hurricanes
(P.L. 109-148)
Emergency Appropriations — Defense,
—
585,919
—
—
—
the Global War on Terror, and
Hurricane Recovery
(P.L 109-234)
Subtotal construction,
455,130
1,560,519
399,000
283,670
429,000
major projects
Construction, minor projects b
228,933
198,937
198,000
210,000
168,000
Supplemental Appropriations
36,343
—
—
—
—
(P.L.108-324)
Emergency Appropriations
—
1,800
—
—
—
— Gulf Coast Hurricanes
(P.L. 109-148)
Subtotal construction,
265,276
200,737
198,000
210,000
168,000
minor projects
Grants for construction of
104,322
85,000
85,000
105,000
85,000
state extended care facilities c
Total $824,728
$1,846,256
$682,000
$598,670
$682,000
Source: Table prepared by CRS based on H.Rept. 109-95; H.Rept 109-464; H.Rept. 109-494; and S.Rept. 109-286.
Note: This table excludes grants for construction of state veterans cemeteries.
a. This account provides funds for constructing, altering, extending, and improving any VA facility, including planning, assessments of
needs, architectural and engineering services, CARES projects, and site acquisition, where the estimated cost of a project is $7
million or more or where funds for a project were made available in a previous major project appropriation. Emphasis is placed
on correction of safety code deficiencies in existing VA medical facilities.
b. This account provides funds for constructing, altering, extending and improving any VA facility, including planning, architectural and
engineering services, CARES projects, and site acquisition, where the estimated cost of a project is less than $7 million. VA
medical center projects that need minor improvements costing $500,000 or more are funded from this account .
c. This account provides grants to states to acquire or construct state nursing home and domiciliary facilities, and to remodel, modify,
or alter existing hospitals, nursing homes, and domiciliary facilities in state homes. A grant may not exceed 65% of the total cost
of the project. P.L.102-585 granted permanent authority for this program, and P. L. 104-262 added Adult Day Health Care as
another level of care that may be provided by state homes. This is a no-year account.

---

CRS-24
Key Budget Issues
In its FY2007 budget request, the Administration proposed several legislative
changes that it asserts will “refocus the VA health care system to better meet the
needs of highest priority veterans — those with service-connected conditions, those
with lower incomes, and those with special health care needs.”51 These proposals are
similar to previous ones that were included in the Administration’s budget requests
for FY2003, FY2004, FY2005, and FY2006, and were rejected by Congress.52
The President’s budget request includes three major policy proposals:
! assess an annual enrollment fee of $250 for all Priority 7 and 8
veterans;
! increase pharmaceutical copayments from $8 to $15 (for each 30-day
prescription) for all enrolled veterans in Priority Groups 7 and 8; and
! bill veterans receiving treatment for nonservice-connected
conditions for the entire copayment amount.
A detailed description of these legislative proposals follows.
Assess an Annual Enrollment Fee
The Administration proposes to establish an annual enrollment fee of $250
beginning October 1, 2006, for all Priority 7 and 8 veterans. Priority Group 7
veterans have incomes above $26,902 for a single veteran (see Appendix 3 for VA
income thresholds) and below the Department of Housing and Urban Development
(HUD) geographic means test level.53 Priority Group 8 veterans are those with
incomes above $26,902 for a single veteran and above the HUD geographic means
test amount. 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 Grant County,
Arkansas, whose annual income in 2005 was $27,145, will be placed in Priority
Group 7, because the veteran’s annual income is above VA’s means test threshold
of $26,902 and below the FY2005geographic means test threshold of $27,150 for that
county. Similarly, a veteran with no dependents living in Orange County, California,
51 U.S. Department of Veterans Affairs, FY2007 Congressional Budget Submissions,
Medical Programs, vol. 1 of 4, p. 3-9.
52 In FY2003, VA proposed a $1,500 deductible for all Priority Group 7 veterans for
nonservice-connected disabilities. For proposals included in FY2004, FY2005, and
FY2006, see CRS Report RL32548, Veterans’ Medical Care Appropriations and Funding
Process, by Sidath Viranga Panangala, and CRS Report RL32975, Veterans’ Medical Care:
FY2006 Appropriations, by Sidath Viranga Panangala.
53 Geographic means test figures are available at [http://www.va.gov/healtheligibility/DOCS/
GMTIncomeThresholds2005.pdf]. Also note that when determining if the veterans should
be placed in Priority Group 7 or Priority Group 8 based on income, the veteran’s income
from the previous year is compared with the appropriate geographic means test threshold
for the previous fiscal year. For example, annual income for 2005 is compared to the
geographic means test threshold for FY2005.

---

CRS-25
whose annual income in 2005 was $42,250, will be placed in Priority Group 7,
because the veteran’s annual income is above VA’s means test threshold of $26,902
and below the FY2005 geographic means test threshold for of $43,000 for Orange
County. It should be noted that there is wide variation in annual incomes of veterans
placed in Priority Groups 7 and 8.
In its FY2004, FY2005, and FY2006 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.
In its FY2007 Views and Estimates letter to the House Budget Committee, the
House Veterans Affairs Committee did not support levying an enrollment fee. The
letter states that “while the Committee understands the policy arguments providing
the basis for the Administration’s proposal for Priority 7 and 8 veterans to assume a
greater share of the costs for their health care in the VA system, the majority of the
Committee does not support these legislative proposals.”54
The Chairman of the Senate Veterans’ Affairs Committee, in his FY2007 views
and estimates letter to the Senate Budget Committee, did agree that “during a time
of high deficits and restrained spending in every account unrelated to national
security, the President’s proposal to shift a small portion of the cost of funding record
growth in VA’s budget on to lower priority veterans is reasonable. I have no
objection to the proposals he has chosen, but I am not necessarily wed to them.”55
It should be noted that at this time, both the House and Senate Veterans Affairs
Committees have not introduced any legislation to give VA the authority to assess
an enrollment fee. Furthermore, the House-passed MIL-CON-QUAL-appropriations
bill and the Senate Appropriations Committee-approved MIL-CON-VA-
appropriations bill do not include any language assessing an enrollment fee.
54 House Committee on Veterans Affairs, Views and Estimates of the Committee on
Veterans’ Affairs regarding the Administration’s FY2007 budget request for veterans’
programs, Feb 23, 2006. Available at [http://veterans.house.gov/legislation/109/budrep07.
pdf].
55 Senate Committee on Veterans’ Affairs, Views and Estimates of the Committee on
Veterans’ Affairs regarding the Administration’s FY2007 budget request for veterans’
programs, March 2, 2006. Available at [http://veterans.senate.gov/index.cfm?FuseAction=
Newsroom.PressReleases&month=3&year=2006&id=484].

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CRS-26
Increase Pharmacy Copayments
The Administration proposes increasing the pharmacy copayments from $8 to
$15 for all enrolled Priority Group 7 and Priority Group 8 veterans, whenever they
obtain medication from VA on an outpatient basis for the treatment of a nonservice-
connected condition. The Administration put forward this proposal in its FY2004,
FY2005, and FY2006 budget requests as well, but did not receive any approval from
Congress. At present, veterans in Priority Groups 2-8 pay $8 for a 30-day supply of
medication, including over-the-counter medications.56
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 an
outpatient basis for treatment of a nonservice-connected condition. The Veterans
Millennium Health Care and Benefits Act of 1999 (P.L. 106-117) authorized VA to
increase the medication copayment amount and establish annual caps on the total
amount paid, to eliminate financial hardship for veterans enrolled in Priority Groups
2-6.57 When veterans reach the annual cap, they continue to receive medications
without making a copayment.
On November 15, 2005, VHA issued a directive stating that effective January
1, 2006, the medication co-payment will be increased to $8 for each 30-day supply
of medication furnished on an outpatient basis for treatment of a nonservice-
connected condition, and that the annual cap for veterans enrolled in Priority Groups
2-6 will be $960.58 There is no cap for veterans in Priority Groups 7 and 8 (see
Appendixes 2 and 3).
It should be noted that at this time, both the House and Senate Veterans Affairs
Committees have not introduced any legislation to giving VA the authority to
increase copayments. Furthermore, H.R. 5385 does not include any bill language that
would give VA the authority to increase copayments.
56 The following veterans are exempt from paying copayments: Veterans receiving a
pension for a nonservice-connected disability from VA; veterans with incomes below
$10,579 (if no dependents), and $13,855 (with one dependent plus $1,806 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.
57 This law allowed VA to increase the copayment amount for each 30-day or less supply
of medication provided on an outpatient basis (other than medication administered during
treatment) for treatment of a nonservice-connected condition. Accordingly, VA increased
the copayment amount from $2 to $7. The medication copayment charge for each
subsequent calendar year after 2002 is established by using the prescription drug component
of the Medical Consumer Price Index. When an increase occurs, the copayment will
increase in whole dollar amounts. The amount of the annual cap increases $120 for each $1
increase in the copayment amount.
58 VHA Directive 2005-052, Implementation of Medication Copayment Changes, Nov. 15,
2005.

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CRS-27
Impact of the Annual Enrollment Fee
and Increase in Pharmacy Copayments
VA estimates that about 200,000 veterans in Priority Groups 7 and 8 would be
affected by the $250 annual enrollment fee and the increase in prescription drug
copayments. According to VA’s estimates, the enrollment fees and increased
pharmacy copayments would generate $514 million in revenue and save VA an
additional $251 million due to reduced demand, resulting in a decrease of $765
million in appropriations for FY2007.
Together two recent studies suggest that veterans may be impacted by increased
pharmaceutical copayments. In one published study it was indicated that patients
with access to the VA’s prescription drug coverage had lower rates of cost-related
adherence problems than patients with Medicare or no insurance coverage. This
study also found that VA patients were also less likely than some non-VA patients
to report other detrimental consequences of medication cost pressures, such as
foregoing necessities to pay for their medication or worrying frequently about how
they could pay for their treatments. 59
In another study that examined the impact of the increased copayment on
veterans’ use of antidepressant medication, VA researchers found that medication
cost could be a prohibitive factor for veterans with copayment obligations. The
researchers further state that veterans who had to pay copayments appear to fill the
antidepressant prescriptions less frequently than veterans who are exempt from the
copayment requirement.60
Third-Party Offset of First-Party Debt
The Administration is requesting that Congress amend VA’s statutory authority
by eliminating the practice of reducing first-party copayment debts with third-party
health insurance collections. VA asserts that this proposal would align VA with the
DOD health care system for military retirees and with the private sector.
With the enactment of P.L. 99-272 in 1986, Congress authorized VA to collect
payments from third-party health insurers for the treatment of veterans with
nonservice-connected disabilities, and it also established copayments from veterans
for this care.61 Under current law, VA is authorized to collect from third-party health
insurers to offset the cost of medical care furnished to a veteran for the treatment of
59 John D. Piette, and Michele Heisler, Problems Due to Medication Costs Among VA and
Non-VA Patients With Chronic Illnesses, American Journal of Managed Care, vol. 10, no.
11, (November 2004), p.867.
60 M. Zimmer, L. Petersen, M. Kubeler, and J. Cully, Effects of Increased Copayment on
Antidepressant Prescription Fill Rates in VA Patients, poster presented at the 24th Annual
VA Health Services Research and Development (HSR&D) Meeting, Washington, DC, Feb.
15-17, 2006 (this study has not been published yet).
61 Consolidated Omnibus Budget Reconciliation Act of 1985, 100 Stat. 372, 373, 383.

---

CRS-28
a nonservice-connected condition.62 If VA treats an insured veteran for a
nonservice-connected disability, and the veteran is also determined by VA to have
copayment responsibilities, VA will apply the payment collected from the insurer to
satisfy the veteran’s copayment debt related to that treatment.
Under the current copayment billing process, in cases where the cost of a
veteran’s medical care for a nonservice-connected condition appears to qualify for
billing under reimbursable insurance and copayment, VA medical facilities sends the
bill to the insurance provider. The veteran’s copayment obligation is placed on hold
for 90 days pending payment from the third-party payer. If no payment is received
from the third-party payer within 90 days, then a bill is sent to the veteran for the full
copayment amount. However, when insurers reimburse VA after the 90-day period,
VA must absorb the cost of additional staff time for processing a refund if the veteran
has already paid the bill. On all insurance policies, the entire amount of the claim
payment is applied first to the copayment. The veteran is then billed only for the
portion of the copayment not covered by the insurance reimbursement and the portion
of the copayment for services not covered by the veteran’s insurance plan (Figure 1).
62 38 U.S.C. §1729; 38 U.S.C. §1710; and 38 U.S.C. 1722A.

---

CRS-29
Figure 1. Present Copayment Process
Off
Sets
Run Claims
Claims
Insurance
Matching Report
Go to “Release
Matching
Review 3rd
1st Party
Start
Payment
Using Payment
No
Charges on
Report
Party Payment
Claim?
Posted
Date from Previous
Hold” Options
Days Deposits
Yes
Release 1st
No
No
Full
No
Partial
No
Review
Go into “Full
Party Charges
Payment?
Payment?
Payment?
Account
Account”
on Hold
Yes
Yes
Determine If There
Is Enough of 3rd
Patient
Yes
No
Party Check to Off-
Insurance?
Payment
Set the Amount of
the Co-Pay
Yes
Determine If There Is
Enough of 3rd Party
Enough?
Check to Off-Set the
Amount of the Co-Pay
No
Yes
Yes
Statement
Decrease 1st Party
Released to the
Co-Pay by 3rd
Apply
Enter 1st Party
Go to “Decrease
Patient for
Party Payment
Insurance
Claim Number
Menu”
Remaining
Amount (NTE Co-
Payment to
Balance
Pay Amount)
Account
Refund
End
Proc 1
Source: Department of Veterans Affairs.

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CRS-30
According to two reports released by the Government Accountability Office
(GAO), the practice of satisfying copayment debt with recoveries made from
third-party insurers has resulted in reduced overall cost recoveries and increased
administrative expenses.63 Under the Administration’s proposal, VA would bill and
collect copayments from patients regardless of any amounts recovered from the
veterans private health insurance plan. As the patient’s bill is generated, VA would
bill the insurer for the full cost of VA care provided to a veteran for a nonservice-
connected condition (Figure 2).
Figure 2. Copayment Process Under New Proposal
Source: Chart prepared by CRS.
According to VA’s estimates, if this proposal is enacted it would contribute
approximately $31.0 million toward VA’s collections. It should be noted that at this
time that the House and Senate Veterans Affairs Committees have not introduced
any legislation to give VA the authority to implement this proposal. Similarly, H.R.
5385 does not include any provisions addressing this issue.
63 U.S. Government Accountability Office (GAO), VA Medical Care: Increasing Recoveries
From Private Health Insurers Will Prove Difficult, GAO/HEHS-98-4, Oct. 17 1997; and
VA Health Care: Guidance Needed for Determining the Cost to Collect from Veterans and
Private Health Insurers, GAO-04-938, July 2004.

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CRS-31
Appendix 1. Priority Groups
and Their Eligibility Criteria
Priority Group 1
Veterans with service-connected disabilities rated 50% or more disabling
Priority Group 2
Veterans with service-connected disabilities rated 30% or 40% disabling
Priority Group 3
Veterans who are former POWs
Veterans awarded the Purple Heart
Veterans whose discharge was for a disability that was incurred or aggravated in the line of duty
Veterans with service-connected disabilities rated 10% or 20% disabling
Veterans awarded special eligibility classification under Title 38, U.S. C., Section 1151,
“benefits for individuals disabled by treatment or vocational rehabilitation”
Priority Group 4
Veterans who are receiving aid and attendance or housebound benefits
Veterans who have been determined by VA to be catastrophically disabled
Priority Group 5
Nonservice-connected disabled veterans and noncompensable service-connected veterans rated
0% disabled whose annual income and net worth are below the established VA Means Test
thresholds
Veterans receiving VA pension benefits
Veterans eligible for Medicaid benefits
Priority Group 6
Compensable 0% service-connected disabled veterans
World War I veterans
Mexican Border War veterans
Veterans solely seeking care for disorders associated with
— exposure to herbicides while serving in Vietnam; or
— ionizing radiation during atmospheric testing or during the occupation of Hiroshima and
Nagasaki; or
— for disorders associated with service in the Gulf War; or
— for any illness associated with service in combat in a war after the Gulf War or during a
period of hostility after November 11, 1998.
Priority Group 7
Veterans who agree to pay specified copayments who have income and/or net worth above the
VA Means Test threshold and income below the HUD geographic index
— Subpriority a: Noncompensable 0% service-connected disabled veterans who were enrolled
in the VA Health Care System on a specified date and who have remained enrolled since that
date
— Subpriority c: Nonservice-connected disabled veterans who were enrolled in the VA Health
Care System on a specified date and who have remained enrolled since that date.
— Subpriority e: Noncompensable 0% service-connected disabled veterans not included in
Subpriority a above
— Subpriority g: Nonservice-connected disabled veterans not included in Subpriority c above
Priority Group 8
Veterans who agree to pay specified copayments with income and/or net worth above the VA
Means Test threshold and the HUD geographic index
— Subpriority a: Noncompensable 0% service-connected disabled veterans enrolled as of
January 16, 2003 and who have remained enrolled since that date
— Subpriority c: Nonservice-connected disabled veterans enrolled as of January 16, 2003 and
who have remained enrolled since that date
— Subpriority e: Noncompensable 0% service-connected disabled veterans applying for
enrollment after January 16, 2003
Source: Department of Veterans Affairs.
Note: Service-connected disability means with respect to disability, that such disability was
incurred or aggravated in the line of duty in the active military, naval or air service

---

CRS-32
Appendix 2. Veterans’ Payments
for Health Care Services
Table 4. Veterans’ Payments for Health Care Services
by Priority Group
Copayments
Humanitarian
Insurance
Emergency
Out-
Billing
Inpatient
Medicationa
Billing
patient
Geographic
VA
Means Test
Means
Copayment
Test
Priority
Yes, but only if
Group 1
care was for
No
No
No
No
nonservice-
No
connected
condition
Priority
Yes, but only for
Groups
veterans with less
2, 3,b 4c
than 50% service
connected
disability and
Yes, but only if
medication is for
care was for
No
No
No
nonservice-
nonservice-
No
connected
connected
condition.
condition
Former POWs
are exempt from
all medications
copayments
Priority
Yes, but only if
Group 5
care was for
No
No
No
Yes
nonservice-
No
connected
condition
Priority
Yes, but only if
Group 6
care was for
(WWI, and
No No
No
Yes
nonservice-
No
0% service-
connected
connected
condition
compensable)
Priority
Group 6
Yes, but only if
(Veterans
care was for
receiving
No
Nod
Nod
Nod
nonservice-
No
care for
connected
exposure or
condition
experience)d
Priority
Yes, but only if
Yes, but only if
Group 7a
care was for
care was for
Yes
No
Yes
nonservice-
nonservice-
No
connected
connected
condition
condition

---

CRS-33
Copayments
Humanitarian
Insurance
Emergency
Out-
Billing
Inpatient
Medicationa
Billing
patient
Geographic
VA
Means Test
Means
Copayment
Test
Priority
Yes, but only if
Yes, but only if
Group 7c
care was for
care was for
Yes
No
Yes
nonservice-
nonservice-
No
connected
connected
condition
condition
Priority
Yes, but only if
Yes, but only if
Group 8a
care was for
care was for
No
Yes
Yes
nonservice-
nonservice-
No
connected
connected
condition
condition
Priority
Yes, but only if
Yes, but only if
Group 8c
care was for
care was for
No
Yes
Yes
nonservice-
nonservice-
No
connected
connected
condition
condition
Source: Table prepared by CRS based on information from the Department of Veterans Affairs.
Notes: Priority Group 7a and 7c veterans have income above the VA Means Test threshold but below the
Geographic Means Test threshold and are responsible for 20% of the inpatient copayment and 20% of the
inpatient per diem copayment. The geographic means test copayment reduction does not apply to outpatient
and medication copayment and veterans will be assessed the full applicable copayment charges. Note that
reduced inpatient copayments can apply to veterans in Priority Groups 4 and 6 based upon the income of the
veteran.
Priority Group 8a and 8c veterans have income above the VA Means Test threshold and above the Geographic
Means Test threshold. Veterans enrolled in this priority group are responsible for the full inpatient copayment
and the inpatient per diem copayment for care of their nonservice-connected conditions. Veterans in this
priority group are also responsible for outpatient and medication copayments for care of their nonservice-
connected conditions.
a. An annual medication copayment cap has been established for veterans enrolled in priority groups 2-6.
Medication will continue to be dispensed after copayment cap is met. An annual copayment cap has not
been established for veterans enrolled in Priority Groups 7 or 8.
b. Veterans in receipt of a Purple Heart are in Priority Group 3. This change occurred with the enactment of
the Veterans Millennium Health Care and Benefits Act (P.L. 106-117) on Nov. 30, 1999.
c. Priority Group 7 veterans who are determined to be catastrophically disabled and who are placed in Priority
Group 4 for treatment are still subject to the copayment requirements as a Priority Group 7 veteran.
d. Priority Group 6 — veterans claiming exposure to Agent Orange; veterans claiming exposure to
environmental contaminants; veterans exposed to Ionizing Radiation; combat veterans within two years
of discharge from the military; veterans who participated in Project 112/SHAD; veterans claiming
military sexual trauma; and veterans with head and neck cancer who received nasopharyngeal radium
treatment while in the military are subject to copayments when their treatment or mediation is not related
to their exposure or experience. The initial registry examination and follow-up visits to receive results
of the examination are not billed to the health insurance carrier and are not subject to copayments.
However, care provided not related to exposure, if it is nonservice-connected will be billed to the
insurance carrier and copayments can apply.

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CRS-34
Appendix 3. Financial Income Thresholds
for VA Health Care Benefits

Veterans with:
Free VA Prescriptions and
Free VA Inpatient and
Travel Benefits for veterans
Outpatient care for veterans
with incomes of:
with incomes of:
No dependents
$10,579 or less
$26,902 or less
1 dependent
$13,855 or less
$32,285 or less
2 dependents
$15,661 or less
$34,285 or less
3 dependents
$17,467 or less
$34,091 or less
4 dependents
$19,273 or less
$37,703 or less
For each additional
$1,806
$1,806
dependent, add:
crsphpgw
Source: Department of Veterans Affairs.

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