President Obama is drawing high praise from veterans’ service organizations for proposing a Department of Veterans Affairs budget that would exceed by $1.3 billion what even VSOs suggested be spent next year.

No president ever offered a VA spending plan that surpassed in size the "Independent Budget" presented to Congress by major veterans groups. Obama seeks to fulfill several high-profile promises made to veterans during his presidential campaign including a big increase in VA health care budgets.

But it was a new and unpopular proposal being studied by the administration that created uncomfortable moments for VA Secretary Eric K. Shinseki when he made separate appearances Tuesday before the House and Senate veterans’ affairs committees.

Obama’s VA budget outline, with full details promised by late April, would raise VA spending to $112.8 billion in the fiscal year that begins Oct. 1. That’s an increase of $15 billion, or 15 percent, over the current budget.

"This is the largest dollar and percentage increase ever requested by a president for veterans," Shinseki told lawmakers.

The plan allows the VA health care system to enroll up to 550,000 new Priority Group 8 veterans by 2013. These are veterans who have no service-connected ailments and have incomes deemed adequate based on family size and geographic location. The total for new enrollees includes 266,000 Group 8 veterans already slated to enroll in VA health system starting this summer under a funding initiative Congress passed last fall.

Obama’s defense and VA budgets also call for a gradual lifting of what remains of the ban on concurrent receipt of both military retirement and VA disability compensation for disabled retirees. The next step would occur in 2010 with concurrent receipt allowed for the most seriously disabled veterans forced to retire short of 20 years. Further details must await the full budget’s release in April, Shinseki said.

Shinseki received a warm welcome when he presented the budget outline to the Senate and House veterans’ affairs committees. But he also got a string of strong warnings from committee members over a cost-saving proposal that Shinseki conceded is under study. The administration is considering charging veterans’ health insurance plans earned through civilian employment for VA’s costs in treating service-connected injuries or ailments.

The VA already taps "third party" insurance plans for treatment of non-service-related conditions. Collections in fiscal 2008 totaled $2.4 billion. The VA expects to collect $2.5 billion this year. The total could jump to $3 billion next year if care of service-connected conditions are included.

Shinseki emphasized that this is only a consideration and not yet part of Obama’s budget request. But members of the veterans’ committees wanted Shinseki to know they won’t support the proposal.

"Veterans with service-connected injuries have already paid by putting their lives on the line. … We should take care of those injuries completely," said Sen. Patty Murray, D-Wash.

Though she recognized that no formal proposal had yet reached Congress, Murray told Shinseki, "I can assure you it will be dead on arrival if it lands here."

Shinseki said the issue is solely about financing, and not about continuing to deliver superior care.

"That is not discussable," Shinseki said.

Steve Robertson, director of legislation for the American Legion, told senators he was appalled to learn of the insurance proposal. The Legion and 10 other veterans groups sent a joint letter to Obama criticizing the idea.

"I could not believe that anybody would ever think that Great West or Prudential or Aetna or any insurance company has an obligation to take care of the men and women who have service-connected disabilities. None of those insurance companies … put us into harm’s way and shouldn’t be held responsible for health care," Robertson said.

The administration, he added, clearly had not thought through the potentially adverse consequences this would pose for veterans’ families.

"Some insurance companies have caps [on total payments] that could quickly be met if they [had] to reimburse for service-connected disabilities," Robertson said.

The dollar caps could result in family members losing access to care. When Sen. Daniel Akaka, D-Hawaii, committee chairman, asked how the Senate might close any funding gap left in the 2010 budget if it rejected the insurance reimbursement plan, Robertson had a ready reply. Congress, he said, should require Medicare to reimburse the VA for treatment of non-service-connected conditions of Medicare-eligible veterans. More than half of VA’s current patient population qualifies for Medicare, he said.

Akaka didn’t react to that suggestion. But it was embraced by Rep. Bob Filner, D-Calif., chairman of the House committee, when Robertson raised it again during the House hearing on the VA budget.

Filner asked if it was really time to take that issue on.

"We’re bringing in Priority Group 8 veterans and trying to figure out how to pay for them and how to hire extra doctors, nurses, providers," Robertson said.

Medicare dollars present "a logical revenue stream."

"If you guys are ready to work with us, we’ll take that on. I agree with you," said Filner.

But won’t Americans see it simply as taking dollars from one government pocket and putting it in another, Filner asked.

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