WASHINGTON (Feb. 2, 2004) - Secretary of Veterans Affairs Anthony J. Principi announced today that President Bush will seek $67.7 billion in the fiscal year 2005 budget for the Department of Veterans Affairs (VA), a $5.6 billion increase in budget authority, primarily targeted for health care and disability compensation.

"The budget proposal reaffirms the president's support for providing the best possible health care and benefits to our veterans," Principi said.

The budget request represents a $1.2 billion, or 3.8 percent, increase in discretionary funding over the enacted level for 2004. Overall, the 2005 budget requests $32.1 billion in discretionary funding (mostly for health care) and $35.6 billion in mandatory funding (mostly for disability compensation, pensions and other benefits programs).

"With the resources requested in this budget, VA will continue to increase veterans' access to our health care system, reduce the time it takes to process claims for benefits, and ensure our national cemeteries are lasting memorials commemorating veterans," Principi said.

Improving Access to Health Care

The president's budget requests $29.5 billion for VA's medical care, an increase of $1.17 billion, or 4.1 percent, over the 2004 level and more than 40 percent above the level in 2001. The medical care budget includes $2.4 billion in collections from third-party health insurance and co-payments from veterans.

"The president's proposal includes ending co-payments for several categories of veterans, including the poorest of the poor and our POWs," Principi said. "We will eliminate the pharmacy co-payment for our most disadvantaged veterans. We will pay for emergency room care or urgent care for veterans in non-VA hospitals."

With the total resources for medical care, VA will be able to provide care to nearly 5.2 million patients, over 1 million more than in 2001, which marks a 20 percent increase.

The department has taken several steps during the last year to reaffirm its health care commitment to the highest priority veterans, particularly service-disabled veterans. VA recently issued a directive that ensures veterans seeking care for service-connected medical problems will receive priority access to VA's health care system. This new directive says that all veterans requiring care for a service-connected disability must be scheduled for a primary care evaluation within 30 days of their desired date.

As a result of the new policy and other regulatory changes presented in the budget, the number of patients within the core service population -- service-disabled veterans, those with low incomes and veterans with special needs such as spinal cord injuries -- will grow to nearly 3.7 million in 2005. Veterans in the highest priority groups will comprise 71 percent of the total patient population in 2005, up from 66 percent in 2003. VA devotes 88 percent of its medical care budget to meet the needs of these highest-priority veterans.

The policy and regulatory changes included in the 2005 budget would require more advantaged veterans to assume a small share of the cost of their health care. These proposals are consistent with recent Medicare reform that addresses the difference in the ability to pay for health care. Among the most significant legislative proposals in the budget are:

• ending pharmacy co-payments for veterans in Priority Categories 2 through 5 with incomes between $9,894 and $16, 509;
• ending all co-payments for former prisoners of war;
• authorizing the department to pay for emergency room care or urgent care for enrolled veterans in non-VA medical facilities;
• ending hospice co-payments;
• increasing co-payments for pharmacy benefits for veterans in Priority Categories 7 and 8 -- those not being paid for service-connected disabilities with income above an income threshold -- from $7 to $15; and
• establishing an annual user fee of $250 for veterans in Priority Categories 7 and 8, who have higher incomes and no compensable service-connected disability.

"My top priority in health care is to ensure that resources are available to care for those veterans who are most deserving of VA's medical services," Principi said. "The proposals in this budget will assist us in continuing that focus on our core service population in our health care system."

In a major initiative, the 2005 budget would allow the department to pay for emergency room care or urgent care for veterans in non-VA hospitals who have insurance if they have enrolled for care in VA's health care system. This provision would ensure that veterans with life-threatening illnesses can seek and receive care at the closest possible medical facility. In addition, VA proposes to eliminate the co-payment requirement for all hospice care provided in a VA setting and all co-payments assessed to former prisoners of war.

The medical care resources included in the president's 2005 budget will allow the department to continue to improve veterans' access to health care. During the last three years, VA has opened 194 new community clinics, bringing the total to 676.

Nearly nine out of every 10 enrolled veterans now live within 30 minutes of a VA medical facility. This expanded level of access has resulted in an increase in the number of outpatient visits from 44 million in 2001 to 51 million in 2003, as well as a 26 percent rate of growth in the annual number of prescriptions filled to a total of 108 million last year.

To further highlight the emphasis on the delivery of timely, accessible health care, the department has set a 2005 performance goal of 93 percent for the share of primary care appointments that will be scheduled within 30 days of the desired date; 99 percent of all appointments will be scheduled within 90 days. For appointments with specialists, the comparable performance goal is 90 percent within 30 days.

Veterans of the nation's recent conflicts are among those for whom the department provides care. Of the veterans of the war in Iraq who have been discharged by the military, 12 percent, or 9,700, have sought and received VA medical care. More than 9 percent of discharged veterans of Operation Enduring Freedom -- nearly 1,400 -- have received VA health care.

The 2005 budget includes $524 million to move forward with the Capital Asset Realignment for Enhanced Services (CARES) program, more than doubling funds from last year to modernize VA's health care infrastructure.

"CARES is about caring for veterans' future needs," Principi said. "We want the highest quality of health care closer to where most of our enrolled veterans live."

Reducing the Time to Process Claims

VA administers six benefits programs - disability compensation, pensions, education, housing, vocational rehabilitation and employment, and life insurance. The 2005 budget includes $1.9 billion in funding to support the management of these programs. This funding level is $26 million, or 2.2 percent, above the level for 2004, and includes resources for about 12,200 Full-time staff.

The proposed budget will enable VA to meet an increasing workload in processing claims for financial benefits, such as disability compensation. One of the key initiatives the president identified when he assumed office in 2001 was to improve the timeliness of claims processing.

Between 2001 and 2003, the average number of disability compensation claims completed per month grew from 40,000 to 68,000. Last year, the backlog of pending claims for compensation and pension peaked at 432,000. By the end of 2003, the department had reduced this inventory to just over 250,000, a drop of over 40 percent.

At the same time, VA has reduced the time a veteran waits for a decision on a claim. In 2002, it took an average of 223 days to process a claim. Today, it takes about 150 days.

"I am gratified with our recent success in improving disability claims processing, and we will continue to work to have the level of service delivery veterans deserve," Principi said. "We are on track to reach an average processing time of 100 days by the end of 2004 and expect to maintain this standard in 2005."

Among the programs supported by the budget are VA's "benefits delivery at discharge" operations at 136 military installations around the country. The department has assigned rating specialists and physicians to bases where service members can have their claims processed before they leave active duty in the military. This initiative makes it more convenient for separating service members to apply for and receive the benefits they have earned, and helps ensure claims are processed more rapidly.

The 2005 budget will continue to support outreach to separating service members and their families through transition assistance workshops, now held at 176 military installations. Additional briefings will be held not only for separating and retiring active duty member, but also for Guard and reserve members. In 2003, more than 110,000 active duty personnel attended transition workshops and 86,000 people attended the briefings.

Meeting the Burial Needs of Veterans

The president's 2005 budget, which requests $455 million for VA's burial program, sets in motion a multi-year expansion, the largest expansion of the nation's cemetery system for veterans since the Civil War. When completed, the expansion will increase the capacity of VA's national cemetery system by 85 percent.

Of the FY 2005 total, $181 million is for VA burial benefits and payments, and $274 million in discretionary funding for operating and capital costs for the National Cemetery Administration and the state cemetery grant program. The discretionary total is $9 million, or 3.4 percent, over the level for 2004.

"With the resources requested for the burial program, VA will be able to significantly expand access while continuing our progress toward maintaining national cemeteries as shrines," Principi said.

During 2005, five new national cemeteries will provide service in the areas of Atlanta, Detroit, Pittsburgh, Sacramento, Calif.; and south Florida. Collectively, these new cemeteries will offer a burial option to more than 1.7 million veterans. The number of veterans living within 75 miles of a national or state veterans cemetery will increase to 83 percent in 2005 with the opening of new national cemeteries and state veterans cemeteries. The figure was 73 percent in 2001.

The budget requests $81 million in construction funds for the burial program in 2005, including initial development of the new cemetery in the Sacramento area as well as expansion and improvements at the Florida National Cemetery (Bushnell, Fla.) and Rock Island National Cemetery in Illinois. Funds are also requested to initiate planning at six new national cemetery sites directed by Congress. These areas include: Philadelphia; Jacksonville, Fla.; Sarasota, Fla.; Birmingham Ala.; Columbia/Greenville, S.C; and Bakersfield, Calif. In addition, $32 million is requested for the state cemetery grant program.

Management Improvements

One of the president's management initiatives calls for VA and the Department of Defense (DoD) to enhance coordination of the delivery of benefits and services to veterans. VA and DoD have established a high-level Joint Executive Council to develop and implement collaborative efforts. The two departments are focusing on three major issues:

• facilitating electronic sharing of enrollment and eligibility information for services and benefits;
• establishing an electronic patient health record system that will allow rapid exchange of patient information between the two organizations by the end of 2005; and
• increasing the number of shared medical care facilities and staff.

VA has several initiatives underway that will lead to greater efficiency and will be accomplished largely through centralization of several major business processes. The department is realigning its finance, acquisition, and capital asset management functions into business offices across the department.

In addition, VA is establishing an Office of Business Oversight that will provide stronger oversight of these functions by the Chief Financial Officer, will improve operations through more specialization, and will achieve efficiencies in staffing. As a result of this realignment, VA will strengthen compliance and consistency with finance, acquisition, and capital asset policies and procedures.

The department continues to make excellent progress in implementing the recommendations of its Procurement Reform Task Force, with 43 of the 65 recommendations completed. These procurement reforms will optimize the performance of VA's acquisition system and processes by improving efficiency and accountability. VA will realize savings of about $250 million by the end of 2004 as a result of these improvements, a figure that will rise after all 65 recommendations have been implemented.

During 2005, one of the department's primary focuses in information technology will be cyber security. VA will provide continuous protection to VA systems and networks. This will require purchases of both hardware and software to address existing vulnerabilities.