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"Providing for Veterans: Addressing Current and Future VA Budget Challenges"

Senate Veterans Affairs Committee Hearing

September 18, 2024 (recording here)

HEARING INFORMATION

Witnesses & Written Testimony (linked):

• The Honorable Shereef M. Elnahal, MD: Under Secretary for Health, Department of Veterans Affairs

• The Honorable Joshua D. Jacobs: Under Secretary for Benefits, Department of Veterans Affairs

Keywords mentioned:

• PACT Act, benefits, mandatory funding, budget shortfall, outreach, community care, accountability, bonuses, transparency, projections, hiring, timely payments

IN THEIR WORDS

OPENING STATEMENTS FROM THE COMMITTEE

• Chairman Jon Tester began by emphasizing the urgency of the hearing, which centered around securing additional funding for the Department of Veterans Affairs (VA) to ensure timely benefit payments to veterans and their families. He expressed his belief that the VA’s expansion of benefits under the PACT Act was crucial and justified, noting the positive feedback from veterans across the country. Chairman Tester acknowledged the rising costs associated with addressing long-standing issues like toxic exposure but stated that doing so was the right thing. He urged the Senate to set aside partisan politics and rhetoric, underscoring that time was running out to secure the necessary funds before the September 20 deadline.

• Ranking Member Jerry Moran expressed his frustration with the VA’s lack of communication regarding the budget shortfall, noting that Congress was not informed of the issue in a timely manner. He criticized the VA and the Office of Management and Budget (OMB) for failing to provide adequate notice before the appropriations process, which hindered Congress’s ability to address the issue effectively. The Ranking Member acknowledged his respect for the VA’s leadership but voiced disappointment in their handling of this specific issue. He stressed the importance of trust and transparency between the VA and Congress, arguing that the failure to communicate had created an unnecessary crisis that could have been avoided with better coordination.

SUMMARY OF KEY POINTS

• Under Secretary Shereef Elnahal described the VA’s efforts to expand care for veterans, particularly through the implementation of the PACT Act. He spoke on the VA’s outreach programs, including the VetFest event, which had enrolled thousands of veterans who were previously ineligible for care. Dr. Elnahal shared the story of a Vietnam veteran whose life was transformed by his newfound eligibility for VA healthcare. He also discussed the VA’s historic hiring efforts, which added over 60,000 healthcare workers and ensured the system could meet the growing demand for care. Dr. Elnahal reiterated the need for additional funds to maintain these services and continue delivering high-quality care to veterans.

• Under Secretary Joshua Jacobs focused on the VA’s unprecedented efforts to provide benefits to veterans and their families. He shared the story of a veteran who passed away from cancer before receiving his benefits but whose family was able to access support thanks to the PACT Act. Mr. Jacobs discussed the VA’s decision to expedite the processing of PACT Act claims, which resulted in the delivery of over $7 billion in benefits in the past fiscal year. He explained that the VA’s success in providing benefits exceeded projections, creating the need for an additional $2.88 billion to ensure that veterans and their families continue receiving payments on time. Mr. Jacobs reassured the Committee of the VA’s commitment to transparency and improving its future budget projections.

• Chairman Tester asked Mr. Jacobs how the VA ended up in its current situation with a funding shortfall and requested clarification on the timeline of events. Mr. Jacobs explained that the VA’s workforce had exceeded their aggressive projections by delivering more benefits to veterans than anticipated, especially due to the PACT Act. He noted that during a mid-session review in July, they identified the need for additional funds after revising their projections. Mr. Jacobs assured the Committee that none of the requested funding was for administrative costs but was meant to support the delivery of care and benefits.

• Chairman Tester then asked Mr. Jacobs about the potential impact on veterans and their survivors if Congress failed to approve the requested $2.88 billion in funding. Mr. Jacobs responded that most benefits are delivered through direct deposit, and while the VA could compress the timeline for delivery, this could risk errors. He noted that around 2% of veterans, particularly those in rural areas or with health conditions, could experience delays of up to two weeks.

• Ranking Member Moran expressed concerns about the VA’s timeline for notifying Congress. He asked Mr. Jacobs when the VA informed the OMB and why Congress was not informed until after a critical appropriations markup. Mr. Jacobs acknowledged that the OMB was informed in June, but he explained that the VA delayed notifying Congress because they needed to verify their assumptions and projections. He apologized for not communicating earlier and committed to improving future communication.

• Ranking Member Moran also questioned the appropriateness of bonuses awarded to VA senior executives, particularly in light of the funding shortfall. Mr. Jacobs admitted that the VA made a mistake in awarding these bonuses and had already recouped 93% of the funds. He stated that trust is vital for encouraging veterans to access benefits, and he took personal responsibility for the error.

• Sen. Maggie Hassan expressed concern over the budget shortfall and asked Mr. Jacobs what processes the VA was implementing to prevent future miscalculations. Mr. Jacobs explained that they were improving their projections and reporting more frequently to ensure transparency. He acknowledged the need to account better for the effects of unprecedented outreach and policy changes like the PACT Act and the MISSION Act.

• Sen. Hassan also addressed the issue of improper bonuses, referencing the Inspector General’s report that found the VA had not followed policy. Mr. Jacobs reiterated that the VA had made process errors and would ensure that future payments were subject to stricter oversight, including approval by the Secretary. Dr. Elnahal added that internal governance issues had contributed to the mistakes, and they were working to implement all of the Inspector General’s recommendations to prevent this from happening again.

• Sen. Marsha Blackburn voiced her concern about the VA's budget shortfall and questioned why the VA did not foresee the issue earlier. She asked about the added transparency measures the VA would implement to improve its budgeting process and mentioned supporting legislation that would require the VA to provide regular in-person budget reports to Congress. Mr. Jacobs responded, agreeing to increase transparency, and mentioned that they had moved from quarterly to monthly spending reports. He admitted that their projections were initially close to actual spending but updated projections in June revealed the risk of a shortfall. Dr. Elnahal said that policy decisions, such as accelerating eligibility for veterans, contributed to the shortfall and acknowledged the need for better communication moving forward.

• Sen. Blackburn also inquired about the controversial bonuses given to VA employees, asking if any remote workers received bonuses. Mr. Jacobs explained that employees were required to come into the office five days per two-week pay period and admitted that mistakes were made regarding the bonuses.

• Sen. Tommy Tuberville questioned whether the improper bonuses were for doctors or administrators. Mr. Jacobs clarified that most bonuses went to frontline workers like HR staff and environmental technicians, but some went to central office leadership, which was inappropriate.

• Sen. Tuberville also asked about the VA’s projection processes, and Mr. Jacobs explained that the VA regularly verifies projections through multiple teams and updates them several times a year.

• Sen. Tuberville then expressed concerns about the $12 billion shortfall projected for fiscal year 2025 and the VA’s increasing reliance on community care. Dr. Elnahal explained that both direct care and community care had increased significantly, with the VA also experiencing a 14.5% growth rate in the community care budget. He noted that the additional funding would support both direct and community care, as well as cover rising costs for pharmaceuticals and prosthetics.

• Sen. Mazie Hirono questioned whether the VA had the necessary tools to project its budget needs accurately and whether these projections could be communicated earlier. Mr. Jacobs responded that they do have the tools but underestimated the workforce’s ability to process claims more quickly than expected.

• Sen. Hirono also asked about the VA’s presence in areas where veterans live. Dr. Elnahal explained that the VA has been increasing its outreach efforts, enrolling 750,000 veterans since the PACT Act was signed and prioritizing areas in need of more clinical space.

• Sen. John Boozman questioned why the VA seemed unaware of the shortfall despite concerns raised by his staff during appropriations. Mr. Jacobs explained that until the June mid-session review, the VA’s spending had been close to projections, but the updated data revealed the need for additional mandatory funding.

• Sen. Bill Cassidy raised concerns about the VA’s hiring practices, asking how many employees were working remotely and how productivity was monitored. Mr. Jacobs explained that most employees worked remotely part-time, but the VA had performance standards in place to monitor productivity.

• Sen. Cassidy also questioned the VA’s use of AI and technology for processing claims, expressing frustration that the VA was not making enough progress in leveraging AI for decision support.

• Sen. Sherrod Brown took a more positive view, celebrating the success of the PACT Act and the VA’s efforts to provide benefits to more veterans. He acknowledged the need for oversight but expressed appreciation for the work being done.

• Sen. Brown emphasized the importance of passing a supplemental bill to prevent delays in benefit payments to veterans. He asked if there was anything the VA could do if Congress failed to pass the funding by the September 20 deadline. Mr. Jacobs explained that while they were hopeful Congress would act, in the event of a delay, the VA would work to provide veterans with letters to inform financial institutions and schools about the potential for late payments.

• Sen. Dan Sullivan expressed frustration over the VA’s $3 billion shortfall and criticized the lack of accountability, particularly pointing to a recent OIG report on systemic issues in leadership and processes. He was disappointed that the VA Secretary was not present to answer questions. Mr. Jacobs responded that the VA was committed to implementing the OIG’s recommendations to improve accountability. Sen. Sullivan also introduced his bill, which would require more frequent reporting and in-person briefings from the VA Secretary. Mr. Jacobs agreed to review the bill.

• Sen. Sullivan inquired about the $11 million in improper bonuses the VA awarded and whether anyone had been held accountable. Mr. Jacobs acknowledged that mistakes were made and stated that the VA was in the process of evaluating the situation for potential discipline. He confirmed that no one had been held accountable yet, but he was working with the Office of Accountability and Whistleblower Protection to address the issue.

• Sen. Richard Blumenthal expressed his support for the PACT Act and praised its success in enrolling veterans for benefits. He pointed out that the shortfall resulted from the high demand for benefits, which was a sign of the program’s effectiveness. Sen. Blumenthal urged quick action to ensure there would be no delays in benefit payments. Mr. Jacobs confirmed that, if acted upon in time, veterans would not be impacted by the shortfall.

• Sen. Blumenthal asked about the most common conditions covered under the PACT Act. Mr. Jacobs mentioned that respiratory issues and certain cancers, as well as hypertension in Vietnam veterans, were the most common. He also shared that many veterans who had never engaged with the VA were now accessing benefits due to increased outreach efforts.

• Sen. Angus King inquired about when the VA became aware of the budget shortfall and when Congress was notified. Mr. Jacobs explained that the VA identified the shortfall in June during a mid-session review and communicated it to Congress in July after verifying the projections. Sen. King emphasized the importance of timely notification and suggested that earlier communication would have been helpful. Mr. Jacobs and Dr. Elnahal both stated that there were no intentional delays in notifying Congress and that they were unaware of any conversations about withholding information.

• Sen. Kevin Cramer raised concerns about the VA’s resistance to community care access, particularly for veterans in rural areas. Dr. Elnahal agreed that community care was essential and noted that community care referrals had grown by 14.5% compared to the previous year. Sen. Cramer suggested that the VA should prioritize utilizing existing community care resources rather than expanding its own bureaucracy, to which Dr. Elnahal agreed, stating that the VA should always make decisions in the best interest of the veteran.

• Ranking Member Moran circled back to accountability, asking whether anyone in the VA or OMB had suggested delaying notification to Congress. Mr. Jacobs and Dr. Elnahal reiterated that no such conversations had taken place and that their focus was on notifying Congress as soon as they were confident in the data. Ranking Member Moran also expressed concerns about how the shortfall may have influenced decisions on defense and domestic spending.

• Sen. King restated the urgency of passing legislation promptly on this matter and encouraged his colleagues to work together to ensure it gets done for veterans to receive their benefits on time.

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SPECIAL NOTE

The date for this hearing was originally listed as Thursday, September 19th, in our weekly Nimitz Report. We apologize for any inconvenience.