Statement
of the
NATIONAL ASSOCIATION OF STATE DIRECTORS
OF VETERANS AFFAIRS
on the
FY 2006 US Department of Veterans Affairs
Budget Request
before the
Joint Hearing of the House and Senate
Veterans' Affairs Committees
April 14, 2005
Presented by
BG Leslie E. Beavers, U.S. Army Retired
President, NASDVA
Commissioner, Kentucky Department of Veterans Affairs

INTRODUCTION
Mr. Chairman and distinguished members of the committee, on behalf of the National
Association of State Directors of Veterans Affairs (NASDVA) I am honored to have this
opportunity to testify this morning and present the views of the State Directors of all fifty states,
commonwealths and territories.
State government is the second largest provider of services to veterans and our role continues
to grow. We feel it is our responsibility to help Congress understand the role of the State
Departments of Veterans Affairs (SDVAs) in complementing the efforts of the federal
government toward "serving veterans." When government at all levels works together to
accomplish the nation's goals, then we have served not only veterans, but also all citizens who
deserve the best return on their tax dollars. We are partners with the federal government in
delivering services to veterans; we are neither stakeholders nor Veteran Service Organizations
(VSOs).
We applaud the leadership of Chairmen Craig and Buyer and Ranking Members Akaka and
Evans, and the other distinguished members of both the Senate and House VA Committees, in
building upon the administration's budget. NASDVA supports the increases in funding, as
reflected in the Committee amendments for the FY 2006 budget. We are beginning to serve a
new generation of veterans who will need help as they transition back to civilian life after service
in Afghanistan and/or Iraq. Because of the uniqueness of these operations, the demand for
mental health services and prosthetics is increasing significantly. The overall level of health
care funding recommended by the administration does not cover current VA health care
operational needs, much less the increased need due to the War on Terror.
VETERANS HEALTH BENEFITS AND SERVICES
NASDVA supports the Capital Asset Realignment for Enhanced Services (CARES)
report and recommendations.
Capital Asset Realianment for Enhanced Services (CARES). We were generally pleased with
the report and recommendations of the CARES Commission and the final plan. We support this
important process and the direction it will move VA as a national system.
NASDVA supports the opening of additional
Community-Based Outpatient Clinics (CBOCs). We would like to see the new priority CBOCs deployed rapidly with
appropriate VA Medical Center (VAMC) funding.
CommunitY-Based Outpatient Clinics (CBOCs). We were pleased to see the continued
development of CBOCs that have greatly improved veterans' access to VA health care and the
recommendation of additional CBOCs, especially since this process has been on hold since
CARES began. We encourage rapid deployment of the recommended new priority clinics over
the next few years with the corresponding budget support to VAMCs to allow this to begin in FY
2006. VA needs to quickly develop these additional clinics, all with mental health services. We
encourage the investment of capital funding to support the many projects recommended by
CARES, since like CBOC development, this spending for infrastructure projects has been
suspended during the CARES process.

We support VA contracting-out some specialty care to private-sector facilities where access is
difficult. Likewise we would like to see this process begin in FY 2006, with sufficient funding in
the budget.
NASDVA recommends an in-depth examination of long-term care and
mental health services.
Lonq-Term Care and Mental Health Services in CARES Initiatives. The CARES Commission
review did not include long-term care or mental health services, but did recommend further
study of both areas. Thus, we ask that a similar study be done to thoroughly examine veterans'
long-term care and mental health care needs, to include gap analysis clearly identifying where
services are lacking. Any study should include consultation with SDVAs. The CARES report
recognizes State Veterans Homes (SVHs) as a critical component of veterans' long-term health
care and a model of cost-efficient partnership between federal and state governments. These
state nursing care facilities and domiciliaries bear over half of the national long-term health care
workload for our infirm and aging veteran population. Forty-eight (48) states provide care for
more than 27,500 veterans in 120 SVHs. We urge you to continue to oppose proposals that
jeopardize the viability of our SVHs. Taxpayers have supported the SVHs through the state's
35% share of construction costs with an understanding that the federal government would
continue to make its contribution through per diem. The federal government should continue to
fulfill its important commitment to the states and ultimately to the individual veterans in need of
care.
NASDVA rejects the proposed revision ofper diem eligibility for veterans in State
Veterans Homes (SVHs) and urges Congress not to act on this proposal, with
special comments to that effect in appropriations language.
Veteran Eliqibilitv for Per Diem in State Veterans Homes (SVHs). The proposed revision of
eligibility for per diem for residents of SVHs would limit it to only service-connected and
catastrophically disabled veterans with special needs. This draconian cut in eligibility would
leave 85% of current residents ineligible for federal per diem benefits. Furthermore, this change
in eligibility would cut federal financial support from 31% to -5% of the daily cost of care, as
reflected in 10TR FY05 data. We commend the Sense of the Senate, as reflected in Senate
Concurrent Resolution 18, rejecting the proposed elimination of per diem reimbursements to
SVHs in the President's budget. We also commend the House Committee on Veterans Affairs
for reporting that they too do not expect to act on the SVH legislative proposal to revise eligibility
criteria. Specific language to this effect should be included in the Appropriations Bill.
NASDVA continues to strongly SUpport the State Home Construction Grant
Program. Clearly, a one-year moratorium will only exacerbate the backlog of
construction projects. The annual appropriation for this program should be
continued and increased. Re-ranking of projects should be eliminated once a
project is established as Priority group 1 (state matching funds are available).
Full Fundinq of the State Homes Construction Grant Proqram. Since 1977, state construction
grant requests have consistently exceeded Congressional appropriations for the program.
According to the FY05 Priority List of Pending State Home Construction Grant Applications,
there are 81 projects in Priority group 1 with state matching funds of $235M for a federal match
of $436M. The proposed grant moratorium exacerbates an already under-funded program,
where previous appropriation was only -$100M. This deficit in federal program support causes

long delays in the establishment of long-term care beds in areas where these services are badly
needed by an aging veteran population. We recommend rejection of the moratorium and an
increase in funding. If the legislative proposal for a one-year moratorium on construction is
accepted, it should only apply to new construction and not renovations of existing SVHs.
Regardless of the moratorium, VA simply requires funding authority in the FY06 budget to
finalize those renovation projects that were approved by the VA Secretary on 9/23/04 for FY05
and have funds committed. The remaining FY05 renovations without commitment (Priority
group 1, sub-priority 4) require $27M in funding and should be included in the FY06 budget.
Additionally, the budget should allow for contingency funding authority for any unprogrammed
renovation submissions that are for "life and safety" issues (sub-priority group 1). The success
of VA's efforts to meet the current and future long-term care needs of veterans is contingent
upon resolving the current mismatch between demand and available funding.
Rankinq of State Home Construction Proiects. Priority groups for construction or acquisition of
SVHs are established in 38 CFR, Chapter 59.50. States that have applied and made matching
funds available for projects are ranked Priority group 1. Due to insufficient funding each budget
year, some Priority group 1 projects do not receive federal funding and are then subject to
reprioritization the following the budget year. Since these projects have state funds committed,
they should maintain their ranking in Priority group 1 except for new projects that are for "life
and safety" issues (Priority group 1, sub-priority group 1).
NASDVA supports full reimbursement for care in SVHs for veterans who have a
70%or more service-connected disability or who require nursing home care
because of a service-connected disability.
Full Reimbursement for Cost of Care for Qualifyinq Veterans in SVHs. The November 1999
Millennium Act requires VA to provide nursing home care to those veterans who have a 70% or
more service-connected disability or who require nursing home care because of a serviceconnected
disability. VA provides nursing home services through three national programs: VA
operated nursing homes, SVHs owned and operated by the state, and contract community
nursing homes. VA General Counsel interpretation of the law allows only contract community
facilities to be reimbursed for full cost of care. SVHs merely receive per diem towards the cost
of care, requiring the veteran to make a co-payment. This is unfair to those veterans who are
eligible for full cost of care but prefer to reside in a SVH.
NASDV A supports increasing per diem to provide one-half of the national average
annualized cost of care in a SVH.
Increase in Per Diem Payments to SVHs. Current law allows VA to pay per diem up to one-half
of the cost of care each day a veteran is in a SVH. However, in 1QTR FY05, VA per diem
amounted to only 31% of the average daily cost of nursing home care ($185.56) and only 25%
of the average daily cost of domiciliary care ($119.94) in a SVH. We ask that per diem for both
programs be increased to one-half of the national average annualized cost of providing care, as
the SVH program is the most cost effective nursing care alternative used by VA.
NASDV A supports implementation of the VA Advantage Program. We recommend
a veterans' medication purchase option be implemented for Priority group 7 and 8
enrollees who only seek medications. We request continued protection of the
Federal Supply Schedule for VA/DOD pharmaceuticals.

VA Advantaqe Proqram. We recommend that VA implement the "VA Advantage" Program.
Working with the Department of Health and Human Services, this program will allow Priority
group 8 veterans aged 65 and older to use their Medicare benefits to obtain VA health care. VA
would receive Medicare payments to cover their costs. This is an HMO concept we have
supported, however, we are concerned about the delay in implementation of a pilot. It was our
understanding a year ago that this program would be available to veterans within a few months.
Another year has passed and the program has languished.
Optional Purchase of VA Medications. NASDVA requests Secretary Nicholson consider a
veterans' medication purchase option. Large numbers of Priority group 7 and 8 enrollees are
seeking prescription drugs; they do not necessarily seek access to the VA health care system.
A medication only purchase program could separate this population from the enrollee lists and
reduce backlogs, assisting VA in delivering services to the core constituency of serviceconnected
veterans. Such a plan could also incorporate future Medicare funding for
pharmaceuticals while maintaining veterans' benefits at a lower cost to VA.
Protection of VA pharmaceutical costs. NASDVA requests continued protection of the Federal
Supply Schedule (FSS) for VA/DOD pharmaceuticals. While we support the goal of reduced
drug prices for all Americans, we are concerned that if the FSS prices were extended to
Medicare recipients or other entities, it would result in increased prices for VA/DOD, diverting
millions of dollars from health care funding for veterans.
NASDVA supports continued efforts to reach out to veterans. This should be a
partnership between VA and the State Departments of Veterans Affairs (SDVAs).
Outreach to Veterans. While growth has occurred in VA health care, due to improved access
with CBOCs, many areas of the country are still short-changed due to geography and/or due to
veterans' lack of information and awareness of their benefits. VA and SDVAs must reduce this
inequity by reaching out to veterans regarding their rights and entitlements. NASDVA supports
implementation of a grant program that would allow VA to partner with the SDVAs to perform
outreach at the local level.
COMPENSATION AND PENSION BENEFITS
NASDVA supports consideration of a greater role for SDVAs in the overall effort to
manage and administer claims processing, regardless of whether the state uses
state employees, Veterans Service Organizations (VSOs), and/or County Veterans
Service Officers (CVSOs).
Restructured Claims Manaqement. Recent studies regarding claims processing have all noted
that VA needs to make better use of the assets of state government and VSOs to assist in claim
processing. The most recent example was the October 2001 Claim Processing Task Force
Report to the Secretary, which stated:
"The full partnership and cooperation of VBA and Veterans Service Organizations (VSOs) are
vital elements in assuring timely service to the veteran. A well-developed network of VSOs and
State Departments of Veteran's Affairs (SDVAs) should be encouraged to cooperatively
enhance the delivery of services to veterans. Service organizations can help improve service to
beneficiaries and increase veteran satisfaction by providing assistance in gathering evidence for

the development of a well documented and "ready-to-rate" claim, helping deter frivolous claims,
and by providing timely information on claim status."
For all the reports and testimony to the contrary, VBA has not been very successful in making
effective use of the stateNSO/county system of service officers and counselors. Veteran
access to competent claim assistance is still very much an accident of geography. Effective
advocacy for veterans from initiation of a claim to a VA decision can improve sufficiency and
timeliness of claims. Numerous studies indicate "well-developed" claims produce better
outcomes for veterans in a shorter time and at a lower cost to VA.
Under the current system of claims processing, the interface between VBA and those who
represent veterans is clumsy and poorly integrated. Most VBA data systems are closed to
outside entities. We recommend service officers not only have access to MAP-D (Modern
Award Processing Development) and CAPRI (Compensation and Pension Record Interchange),
but also that VBA explore methods of integrating existing applications and processes with those
of the SDVAs, VSOs, and county service officers supporting veteran claim processing.
The SDVAs, nationally chartered VSOs, and county veteran service officers have the capacity
and capability to assist VA. NASDVA can be an effective partner with VA to achieve higher
performance standards in claims preparation. SDVAs could assume a role in more effective
and comprehensive training programs and certification of service officers to ensure competence
and technical proficiency in claims preparation. We can support VA in their "duty to assist"
without diminishing our role as the veterans' advocate.
We recognize that the VBA budget supports an increase of 113 FTEs. Since the average time
to process an initial claim is increasing, additional investment in training, FTEs, and technology
will be needed to reach sustainable quality and timeliness goals.
NASDVA strongly SUpports passage of legislation to eliminate the time-phased
concurrent receipt of military retirement pay and service-connected disability
compensation.
Full Concurrent Receipt. We appreciate the FY05 Defense Authorization Act authorizing full
concurrent receipt of retired pay and veterans' disability compensation for the 14,000 retirees
with 100% VA disability ratings. But we are disheartened by the 000 decision to exclude the
30,000 retirees currently rated as "unemployable" and receiving disability compensation at the
100% rate. This decision should be made on the basis of fair play, not 000 budget impact.
NASDVA strongly supports passage of legislation to eliminate the time-phased concurrent
receipt of military retirement pay and service-connected disability compensation for military
retirees. These are both earned entitlements and should be received simultaneously and we
applaud legislation that corrected this inequity for those who are 100% VA rated. This now
needs to be corrected for all military retirees regardless of their level of VA service-connected
disability.
BURIAL AND MEMORIAL BENEFITS
NASDVA recommends an increase in the plot allowance for all veterans to $1,000
per interment. We strongly support an increase in funding for the State Cemetery

Grant Program. A new federal/state National Cemetery Administration (NCA)
grant program could be established to support state costs.
Increase in Burial Plot Allowance. The average operational cost of interment in a state veterans
cemetery is -$2,000. This adds to the fiscal burden of many SDVAs. The current burial plot
allowance of $300 per qualified interment provides -15% of the average cost of interment.
NASDVA recommends the Plot Allowance be increased to $1,000 in order to offset operational
costs. The increase should also apply to the plot allowance for veterans' interment in private
cemeteries.
Increased Fundinq for State Veterans Cemetery Grant Proqram (SCGP). The State Veterans
Cemetery Grant Program (SCGP) has greatly expanded the SDVAs' ability to provide
gravesites for veterans and their eligible family members in those areas where national
cemeteries cannot fully satisfy burial needs, particularly in rural and remote areas of the country.
Interments in state veterans cemeteries have grown 36% and the number of state veterans
cemeteries has increased by 38% between 1999 and 2004. These increases were made
possible by the SCGP. However, the FY06 $32M proposed appropriation is insufficient to
address the 40 pre-applications for establishment of new cemeteries and expansion and/or
improvement of existing cemeteries, with outstanding projects totaling $160M. Obviously, this
has created a backlog for grant funding, denying veterans and eligible family members a final
resting place and lasting memorial to commemorate their service to our nation. SCGP funding
should be increased to at least $50M.
Establishment of a State Veterans Cemetery Operations Grant Proqram. SDVAs are provided
construction grants for veterans' cemeteries and a limited burial plot allowance as discussed
above to partially offset the cost of interment. Operational costs for both state and national
veterans cemeteries continue to rise. Funding for the operation of the National Cemetery
Administration has increased steadily. However, once a state establishes a state veterans
cemetery there is no further source of federal funding to defer operational costs. NASDVA
recommends the establishment of a federal grant program to assist state veterans cemeteries
with operational costs.
HOMELESSNESS AMONG VETERANS
NASDVA supports efforts to diminish the national disgrace of homelessness among
veterans. SDV As would prefer per diem funds for homeless veterans pass through
the state to non-profit organizations, ensuring greater coordination, fiscal
accountability and local oversight of the services provided.
Homeless Providers Grant and Per Diem Proqram. We applaud the proposed request for
permanent authority for the Homeless Providers Grant and Per Diem Program and the
proposed authorization to increase annual spending to $130M. VA grants greatly assist states
in reducing homelessness among veterans and we urge an increase in per diem (currently
$27.44) to ensure appropriate support services at transition facilities. Additionally, NASDVA
recommends VA per diem funding pass through the SDVAs' accounting system prior to
disbursal to the not-for-profit agency. This would create an appropriate level of accountability
and collaboration between non-profit agencies and SDVAs, ensuring funding is used to provide
care to veterans in the program.

CONCLUSION
Mr. Chairman and distinguished members of the VA committees, we respect the important work
that you are doing to improve support to veterans who answered the call to serve our country.
NASDVA remains dedicated to doing our part, but we urge you to be mindful of the increasing
financial challenge that states face, just as you address the fiscal challenge at the federal/eve/.
I would like to emphasize again, that we are partners with VA in the delivery of services and
care to our Nation's patriots.
This concludes my statement and Jam happy to respond to your questions.